TOKYO — Donald Trump’s Liberation Day sure seems like a long time ago. In its place comes Capitulation Day, as the self-proclaimed “Tariff Man” caved in to China’s Xi Jinping faster than even the investment bulls had hoped.
Blinked. Flinched. Retreated. Quit. Swerved. Blanched. Forfeited. Wavered. All are words America’s most mercantilist leader in 125 years hates now that they’re being used to describe how China outmaneuvered his White House with the tariff truce announced Monday in Geneva.
Trump and his surrogates are pretzeling themselves trying to spin this as anything other than a disastrous climbdown. But there’s just no way to sugarcoat the popping of champagne corks in Beijing today as Trump’s 145% tariffs are collapsed to 30% for at least 90 days.
Yet the odds of this economic armistice holding are even lower than Trump’s flagging approval rating. While there are many reasons why, here are the three biggest.
One, headlines about Trump cowering amid plunging markets are sure to pull him back into the fray. If there’s anything that animates the art-of-the-deal president, it’s being perceived as the “loser” in any negotiation.
Headlines about his about-face and Xi skillfully playing the long game – giving Trump little in return for the pause beyond dropping its new 125% tariffs – will surely enrage Trump.
So will news analysis articles on how Japan, South Korea, Singapore and other Asian nations can outmaneuver Trump the same way Team Xi did.
This “total reset,” as the White House calls it, is by far “Trump’s biggest climbdown to date,” says Eurasia Group founder Ian Bremmer. Beijing, adds Mark Williams, economist at Capital Economics, just “successfully called Trump’s bluff.”
Trump’s return to the trade-war battlefield isn’t assured. But the chances that he just sits back and lets a humiliating news cycle play out in real time don’t seem great. It would require a level of poise and self-control that the mercurial 78-year-old from Queens has seldom, if ever, displayed before.
But Trump’s tactical retreat in the hottest theater of trade-war confrontation sends a message to other world leaders dreading their visits to the Oval Office: plunging markets will change Trump’s mind in an instant.
Events in Geneva are a “sign that the US is more desperate than China to deliver the ‘de-escalation’ message to the market,” analysts at Jeffries, an investment bank, write.
Two, China is very unlikely to cede the concessions Trump thinks he deserves.
Now, of course, comes the hard part. Trump is sure to see his share pullback to a 30% tariff from 145% as a gift to Xi, deserving of some serious reciprocity.
Team Xi will likely have a very different view. From Beijing’s perspective, Trump looked into the financial abyss and saw irate Wall Street titans glaring back at him.
JPMorgan Chase CEO Jamie Dimon, who runs the globe’s biggest bank by market capitalization, spoke for The Street when he complained Trump’s tariffs were “too large, too big and too aggressive” — even if one thinks it’s wise to play hardball with foes and allies alike.
Increasingly dire warnings from retailers about empty shelves and photos of idle container ships crowding the shores of Seattle, Los Angeles and Baltimore broke through.
Headlines about several trillions of dollars of stock market losses, talk of a “Trumpcession” and chatter that the so-called “bond vigilantes” showed the White House who’s boss left Trump little choice.
The same went for China’s stance going into the weekend trade talks in Geneva. Team Xi demanded a goodwill gesture on tariffs; Trump ultimately obliged.
The abrupt detour in phraseology says everything. Around Liberation Day, Trump World argued the US is being “looted, pillaged, raped and plundered by nations near and far.” Now, the chatter is about “the importance of a sustainable, long-term and mutually beneficial economic and trade relationships.”
Observers are free to view this as a split-screen moment. What it really is, though, is the economic equivalent of a lobotomy. This isn’t a de-escalation; it’s an alternative intellectual universe.
But by now, Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer know full well that China is feeling emboldened, not cowed, by the last two weeks. As Team Trump seeks a concessions list from China, Xi’s men are demanding to see Trump’s.
This won’t go down well in Trump World. But then, Trump’s rather desperate trade “deal” in name only with the UK set quite a precedent.
Having a trade surplus with the UK, it’s an open question why a US leader would spend political capital negotiating with Prime Minister Keir Starmer’s government. The answer: extreme appetite for a perceived win, any win at all.
Here’s how University of Michigan economist Justin Wolfers sums of Trump’s trade “deal” with London: “Laser focused on reducing prices for everyday Americans from Day One, the president has struck a deal that will lower the price of Rolls-Royces, Bentleys, Jaguars, Aston Martins, Range Rovers, and Minis. No other consumer goods received carve-outs.”
Three, Trump’s 40-plus-year belief that tariffs are a magic bullet to make America great again.
Trump’s most consistent economic view — one might say the only consistent view — through the decades is that Asia is exploiting the US and only import taxes can save the day.
Which other public figure would call tariffs “beautiful” and claim they will “supercharge” the US economy when everyone else knows they’re inherently stagflationary?
Nor does Trump appear to understand that retailers and customers pay these levies, not the country shipping goods to Amazon, Target and Walmart. He also believes, wrongly, that tariff “revenues” can replace income taxes in an economy carrying a US$36 trillion-plus national debt.
At present, no one can answer the where-to-now question. The 90-day pause in Trump’s 145% tariff created white canvas onto which investors can project their best-case/worst-case scenarios.
“If the US can get the Chinese to commit to meaningful trade rebalancing within 90 days, it would be historic,” says Jamie Cox, managing partner of the Harris Financial Group. “However, the Chinese are quite adept at stalling, so there’s still a very steep hill to climb to get a real agreement.”
Here, Team Xi could take a page from former Japanese Prime Minister Shinzo Abe. In 2018 and 2019, the late Abe managed to slow-walk negotiations with the Trump 1.0 White House.
At the time, Abe cozied up to Trump like no other democratic leader. He flattered Trump ad nauseam, gave him expensive gifts — including a $3,800 golf club — and even nominated him for a Nobel Peace Prize.
It didn’t win Japan a perfect return. Despite Abe’s pleas, Trump exited the US-led Trans-Pacific Partnership, the core of Tokyo’s effort to contain China economically.
Nor did Trump 1.0 give “friend” Abe a waiver on steel and aluminum taxes. And Japan’s ruling Liberal Democratic Party was none too happy that Trump’s weird flirtation with North Korean tyrant Kim Jong Un came at the expense of Japan’s national security.
Yet, Abe succeeded in dragging out the clock for so long that a desperate Trump agreed to a bilateral deal that altered nothing of note in US-Japan trade dynamics. In fact, Abe even got Trump to take autos off the table.
As Jeffrey Schott, economist at the Peterson Institute for International Economics, notes, the pact “did little more than partly restoring the benefits that Trump recklessly threw away when he pulled the United States out of the Trans-Pacific Partnership.”
No doubt, Team Xi is busily strategizing on their own Abe-like dodge, minus the aggressive flattery. Xi’s Communist Party, of course, does not have to contest mid-term elections 18 months from now. And Xi knows it.
As such, Beijing is in no hurry to sign a “Phase Two” trade agreement with a US leader almost certain to demand a “Phase Three” round of talks a year from now.
At the same time, US officials are learning the hard way that Trump’s chaotic Phase One process prompted China to pivot to other markets.
Today, China’s top trading partner is the 10-member Association of Southeast Asian Nations (ASEAN) followed by the European Union.
Also, China is actively growing its market share among the BRICS – Brazil, Russia, India, China, South Africa – and the Global South. Xi’s “Made in China 2025” strategy has been quietly making the nation more self-sufficient.
“De-risking, today, is often described as a Western goal,” economists Brendan Kelly and Michael Hirson wrote in a recent Foreign Affairs article.
“But China has been intentionally pursuing such a strategy for over a decade. A central focus of the Made in China 2025 initiative, which Beijing launched in 2015, was to reduce China’s reliance on foreign products. And to morph China into a tech leader in semiconductors, batteries, biotechnology, aerospace and artificial intelligence.”
Yet Kelly and Hirson also doubt China and the Trump administration will ever forge a workable relationship.
“Genuinely delivering on the terms of an ambitious deal would require enormous political commitment from both capitals to overcome the logic of de-risking,” Kelly and Hirson write.
They conclude that “the bottom line is that no matter how much Xi or Trump says he wants a deal, no substantial reconsideration of de-risking is likely to happen in the next four years.”
Trump disputes this assertion, and acerbically so. But the ways in which Xi has Trump’s number and this White House is boxed in by financial markets that are calling the shots, it’s hard to believe that the tariff truce agreed in Geneva can hold for very long.
Follow William Pesek on X at @WilliamPesek
