U.S. President Donald Trump’s unwarranted global tariff war, which began on April 2, 2025, with steep 145 percent tariffs on China, alerted economists to unforeseen global consequences. As China’s economy relied heavily on manufactured goods, and with the U.S. as its largest export destination, the Trump administration believed that imposing tariffs could weaken China and compel it to comply with its terms and conditions. Beijing, well-prepared in advance, proved this belief wrong. China’s resolute response within weeks forced the U.S. to enter negotiations, which took place from May 10 to 12 in Geneva, in which the two sides agreed to suspend tariffs for 90 days. The success of Beijing’s policy relied on several factors.

The recent China-U.S. economic and trade talks have helped ease trade tensions between the world’s two largest economies. Tariffs have been reduced significantly, lifting the pessimistic mood. However, a sustainable trade agreement has not yet been sealed.

The deal will spell the end of WTO’s system of setting tariffs by consensus, which has been in operation since the inception of the world body in 1995. It will usher in a new era in which Washington alone will set tariff rates.

China’s new export licensing system strengthens its control over key rare earth elements, deepening supply chain risks. Although new processing facilities are emerging abroad, they won’t soon offset China’s dominance, prolonging global uncertainty.

To Donald Trump’s surprise, China showed no fear of tariffs. Instead, it launched a powerful tit-for-tat counteroffensive that caused the United States to back off. Trump’s pattern of bullying, his obsession with bellicose showmanship, his love of flattery and his attempts to instill fear are on display for all to see.

Despite de-escalation in Geneva, trillions of dollars may have been lost in the unwarranted trade wars.

A trade deal between China and the United States is nowhere in sight. The mountain of issues could take a long time and enormous effort to resolve. It’s certainly not going to happen in three or four weeks, as Trump has suggested. More likely, it will be months, if not years.

History may rhyme, but the economic drama now unfolding in the United States defies historical reason. When the US Federal Reserve’s technocrats collide with an inexperienced and capricious presidential administration, conventional macroeconomic tools quickly become impotent.

The recent Financial Times editorial by economist Michael Pettis, in which he advocates for U.S. capital controls to achieve balance in its external accounts, is emblematic of a deeper and more troubling reality: American economic policy has entered a conceptual dead end.

Donald Trump’s “reciprocal tariff” policy is intended to push back against globalization, but its inherent structural problems will only accelerate the trend of “de-Americanization” worldwide.