Despite a temporary agreement, rising tensions between the US and China are once again shaking global markets.
While the US-China trade truce was expected to ease tensions between the world’s two largest economies, a new wave of rhetoric and retaliatory actions is casting serious doubt on the stability of the deal. From plummeting Chinese exports to dire warnings from major financial institutions, the relationship between Washington and Beijing is showing signs of renewed fragility.
Widening Trust Deficit Between the US and China
The so-called trade truce between the United States and the People’s Republic of China is facing major headwinds. Both nations have publicly criticized one another, signaling growing mistrust over their willingness to uphold the agreement’s terms.
On Wednesday, China’s Ministry of Commerce announced it would pursue legal action against any individual or organization supporting US efforts to restrict the use of Chinese advanced semiconductor technologies. The statement followed a recent warning from the US Department of Commerce, which had declared that using Huawei chips—even outside US borders—could violate American export controls. Although the warning was later quietly removed, it heightened global uncertainty and market volatility.
Clear Indicators of Disrupted Trade Flows
New data revealed that exports of Apple iPhones and other mobile devices from China to the US dropped to their lowest levels since 2011 in April. This sharp decline is widely seen as a direct consequence of the Trump administration’s new tariffs, which have upended trade flows and disrupted supply chains.
At the Port of Los Angeles—the busiest container terminal in the US—shipping volumes plunged by as much as 30% in early May. The downturn has primarily affected importers and retailers dependent on Chinese goods, underlining the immediate impact of tariff policies.
Warnings from Economists and Industry Leaders
Business leaders and economists are raising alarms about the long-term consequences of the escalating tariff war. JPMorgan CEO Jamie Dimon stated on Monday that markets are underestimating the real impact of current tariffs, calling them “pretty extreme.” Jane Fraser, CEO of Citigroup, echoed similar concerns, noting that many companies are delaying investments amid growing policy uncertainty.
Meanwhile, Walmart’s earlier warnings about looming price increases sparked a sharp response from President Trump, who insisted that the retail giant should “eat the tariffs” rather than passing costs on to consumers.
Escalating Political Rhetoric and Policy Announcements
As tensions continue to rise, the Trump administration has sharpened its rhetoric. Treasury Secretary Scott Bessent announced that if trade negotiations with key partners fail to progress during the 90-day pause, tariffs will return to previous levels. Speaking to CNN, Bessent emphasized that the US has put 18 priority nations on notice and is prepared to increase tariffs again if necessary.
President Trump added on Friday that new tariff rates will be announced in the coming weeks, stressing that the administration lacks the capacity to negotiate with all trading partners simultaneously. Talks will proceed on a staggered basis.
Looking Ahead: A Fragile Outlook for Global Trade
Analysts warn that continued uncertainty could once again threaten global economic stability. The fate of the US-China trade truce now hinges on the decisions and diplomacy of both sides in the days ahead.
