The trade deal between the United States and China, which was just signed last week, appears to be unstable and at risk of failure, according to analysts at Capital Economics. While the agreement helped ease tensions by reversing some previous trade barriers, the real root of the dispute between the world's two largest economies has yet to be resolved. In fact, current relations appear to be more tense than in early 2025.
The durability of the trade truce will be tested when President Donald Trump's 90-day reprieve from "reciprocal" tariffs expires next week. While China is not directly affected by the expiration date, Washington may use agreements with other countries such as the United Kingdom and Vietnam to put indirect pressure on Beijing. These agreements contain provisions limiting China's influence in supply chains as well as high tariffs on goods transiting from China.
Analysts also warned that President Trump could still impose new tariffs on Chinese goods moving to other countries even if no deal is reached with those countries. However, efforts to block alternative trade routes are expected to be difficult to implement and will likely only lead to more indirect trade diversion.
China now faces a major dilemma: whether to remain silent and maintain the stability of the agreement, or to respond and risk damaging relations with third countries and derailing the trade truce. Whatever Beijing decides will set a new course in a global trade war that is far from over.
