US-China Trade Truce Extended Amid Ongoing Negotiations

Just before new tariffs were to be imposed, the US and China announced a 90-day extension to their trade truce, allowing for continued negotiations on key trade issues while attempting to stabilize economic relations.

The US and China have officially extended their trade truce by an additional 90 days, a decision made mere hours before a planned increase in tariffs was about to take effect. The announcement, delivered by US President Donald Trump via executive order, effectively extends an agreement established in May that had temporarily suspended certain tariffs on each other's goods.

The looming threat of increased tariffs was a primary motivator for the extension. Without the delay, tariffs would have spiked this Tuesday, potentially leading to further complications for both economies. Last month, discussions between the two nations concluded positively, with both sides describing the talks as "constructive." At that time, China reiterated its aim to maintain the truce, while US representatives hinted that Trump would be the final decision-maker on the matter.

If the planned tariffs had gone into effect, it would have exacerbated trade tensions and created additional uncertainty regarding economic conditions and consumer prices. Tensions between the US and China have been escalating since April, when Trump introduced extensive tariffs impacting goods internationally—with China facing some of the most significant increases. In retaliation, China imposed tariffs of its own, leading to a series of retaliatory measures that dramatically escalated trade costs and nearly derailed bilateral trade altogether.

Mediated discussions have been focusing on critical issues, including access to Chinese rare earth materials, China's procurement of Russian oil, and US restrictions on sophisticated technology exports, notably microchips. Recently, Trump eased some export controls, permitting companies like AMD and Nvidia to sell specific chips to China while requiring a 15% revenue share with the US government. Additionally, the US continues to call for the separation of TikTok from its Chinese owner, ByteDance, which has met with resistance from the Chinese government.

In a separate address to the press on Monday, Trump refrained from making any firm commitment to extending the truce but commented that economic discussions had "been going nicely." Just one day prior, he urged China to significantly ramp up its imports of US soybeans. Despite the truce, trade activity between the US and China has seen considerable impacts this year, with US imports from China in June plummeting close to half compared to June 2022.

As of the first half of the year, US imports from China totaled $165 billion, reflecting a decline of approximately 15% from the prior year, while US exports to China fell by a significant 20% during the same period.