This expert sees the US-China thaw continuing, tariff risk fading—for now

Mint

2 days ago

David Meale, the new head of Eurasia Group's China, is optimistic that the recent de-escalation in trade tensions between the U.S. and China will continue, which should limit the risk of higher tariffs against China in the near-term.
After three decades in the U.S. foreign service, most recently as deputy chief of mission in Beijing, Meale knows the difficulty arranging summits and cabinet-level meetings with foreign officials. He took note of the positive tone after Secretary of State Marco Rubio—formerly a harsh China critic—recently met with his counterpart, Foreign Minister Wang Yi. Rubio's description of the meeting as positive and 'very constructive" was 'jaw-dropping," Meale said. Now the U.S. and China are seeking to arrange a face-to-face meeting between President Donald Trump and China's Xi Jinping, possibly in Korea in October, he said.
The two sides are dialing down the temperature after an April escalation that led to triple-digit tariff rates and then disputes over whether each country was living up to restrictions agreed to in subsequent meetings. Recently, China has allowed the sale of critical minerals, including magnets crucial to the auto and industrial sectors, and the U.S. has allowed Nvidia to sell AI chips to China that it had previously restricted.
'We are on the road—and that is everything in the bilateral relationship," says Meale. 'Things don't get done unless you are looking ahead to a cabinet-level meeting so all the mechanisms are locking in to have productive discussions in the interim."
That could mute further tariff-related risks in the interim and takes some of the importance out of the Aug. 12 deadline for when tariffs announced in early April snap back to 34%. Meale is skeptical that the U.S. will unveil sectoral tariffs aimed at China before a leaders' meeting.
In a meeting or leading up to it, the U.S. could ratchet back some or all of the 20% tariffs it imposed on China on grounds of fentanyl flows, Meale said. He noted progress on this front, including a rare meeting between the U.S. Ambassador to China, David Perdue, and China's Minister of Public Security Wang Xiaohong in June.
Eurasia Group estimates tariffs on China sit at a weighted average of about 40% and could get under 30% by year-end if there is some relief on fentanyl-oriented tariffs.
The rivalry between the two countries though isn't going away, limiting how long any detente is likely to hold. Meale expects the U.S. to unveil sectoral tariffs and other export restrictions after a leaders meeting.
'This is a temporary de-escalation. Nothing has fundamentally changed," Meale says. 'It's like a sine curve. That's the new end-state: kicking the can down the road and talking and solving a problem here or there."
Write to Reshma Kapadia at [e-mail]