A supposed diplomatic masterstroke of late 2025 saw Donald Trump and Xi Jinping “agree” to claw back some of their own trade-war excesses, for example by cutting U.S. duties on Chinese imports from a ludicrous 145 percent down to a still-outrageous 55 percent, and Beijing reciprocating from 125 percent to 10 percent.
Consumers, naturally, are thrilled.
Both the White House and Beijing declared “victory” in the trade saga that actually looks an awful lot like mutual backpedaling after months of bombastic statements and self-imposed tariff-bonanza. Each capital put their own spin on the narrative, trying to ensure a positive reaction.
Meanwhile, the rest of the world grimaces.
Just months before the pact, President Trump had declared a “national emergency” on trade – imposing a flat 10 percent tariff on all imports and piling on even steeper “reciprocal” duties for so-called “offender” nations. The air was full of ultra-patriotic buzzwords.
China – not to be outdone – retaliated with its own escalation, peaking at a 125 percent tariff on American products.
Not surprisingly, a spiral of tariffs ensured, prices shot up and global supply chains snarled. Outcomes benefiting nobody.
After a summer of intense negotiations, the teams quietly agreed to dial it back instead of openly admitting that the “maximal pressure gambit” simply went too far. Thus, the pack is a belated damage control operation disguised as a brilliant breakthrough.
The devil is in the fine print. Though everybody focuses on tariffs, the real issue is the mineral market.
Rare earth materials (the critical components in everything from EV batteries to fighter jets) were the ace up Beijing’s sleeve. And the export curbs on these elements became the turning points as by mid-2025, they started hobbling Western industries enough to make even the most hawkish tariff-supporters stop and ponder.
Reports suggest the U.S. only got China to ease its bans after securing commitments to resume exports of key minerals and magnets. As one analyst dryly notes, the “truce” allowed Washington to impose a still-punitive 55 percent tariff while getting China to open the spigot on cobalt and neodymium.
It’s diplomacy via geology – globally strategic, certainly, but one wonders if all the negotiating happened under the blinking lights of a warehouse of shiny ore.
All this chest-thumping comes with a grim tab.
Independent economists have been clear: the 2025 tariff onslaught is already dragging down American living standards. Yale’s Budget Lab estimates that the economy is about $105 billion smaller each year because of these duties – roughly $1,800 extracted from every household in higher prices.
The Tax Foundation’s model is equally dire, pegging the “tax” on a typical U.S. family at about $1,200 this year and a soaring $1,600 in 2026.
Even on the papers of elites it’s a lose-lose: winners and losers scramble to “diversify” trade, but families at home pay the price. The Budget Lab study puts it plainly: the “price level rises by 1.3% in the short run,” and tariffs bite hardest in your closet and garage, as taxes on such items are fully passed on to consumers at checkout.
Still, global trade responded mostly positively – creatively trying to invent new routes where possible to exploit loopholes in legislation. Goods that would have gone to the U.S. straight from China now loop through Mexico, Vietnam or even European ports and British warehouses. The broader pattern is unmistakable: regional trade blocs and “friendshoring” have blossomed as necessity.
Half of the growth in world trade this year, according to one analysis, is down to just this rerouting of U.S. imports away from China.
Of course, once you pound a nail with a hammer, it’s hard not to see the dents: Asia-Pacific and North America now quietly tout trade deals to lock in non-Chinese supply, just in case. In short, the new “free trade” map is a patchwork of guarded alliances – and the old superhighway to China is under construction detours.
All the while, the ordinary consumer gets a gift that keeps on taking: higher prices.
After all the noise, it’s bittersweet to watch both governments pat themselves on the back.
When, in reality this “peace deal” is a cosmetic haircut on the monster they created. Cutting a tariff from 145 percent to 55 percent may sound significant – but remember, 145 percent was always the absurd ceiling Mr. Trump himself bragged about, and 55 percent still means most goods cost the end consumer well over face value.
Meanwhile, Chinese leaders will crow that their factories won a great victory by slashing their levies to a token 10 percent (almost pre-trade-war levels), all the while shipping heaps of goods to friends next door.
Each side can now frame the reset as “pragmatic” and “win–win,” even though it’s mostly old behavior begrudgingly amended, while the “truce” is less a grand bargain and more a joint admission of error.
