Context:

The US and China are poised to engage in negotiations in Switzerland, marking the first high-level meeting since the US imposed tariffs on China in January, to which China retaliated with its own levies, leading to a stand-off. The talks are happening amidst mutual signals to break the deadlock, with neither side wanting to appear as having conceded. Both economies are under pressure from the tariffs, with China experiencing a decline in factory output and the US facing economic contraction, affecting industries reliant on Chinese goods. The timing of the talks is crucial, coinciding with Xi Jinping's visit to Moscow, emphasizing China's global positioning. While optimism surrounds the negotiations, experts caution that a comprehensive deal addressing deeper issues may take time to materialize, with initial talks likely setting the stage for future discussions.

Dive Deeper:

• The US-China trade war has escalated with tariffs reaching 125%, and some Chinese imports to the US facing duties as high as 245%, leading to significant economic strain on both sides.

• Despite weeks of fiery rhetoric and posturing, both nations have signaled a willingness to negotiate, though neither wants to appear as the weaker party; negotiations are scheduled in Switzerland.

• China's manufacturing output has been adversely affected, with April activity dropping to its lowest since December 2023, while US economic contraction and supply chain issues have heightened concerns among industries dependent on Chinese imports.

• The timing of the talks aligns with Xi Jinping's visit to Moscow, where he projects China's strength as a global leader, emphasizing its trade options beyond the US.

• While the upcoming talks have sparked cautious optimism, they are expected to serve as a preliminary exchange of positions, possibly setting the groundwork for more comprehensive future negotiations.

• Past negotiations, such as the 2020 'phase one' deal, have addressed some tariff issues but left deeper systemic frictions unresolved, which experts believe will continue to challenge the bilateral trade relationship.

• Both countries face domestic pressures to alleviate market anxieties, with the talks in Geneva seen as a necessary step to reassure businesses and constituencies affected by the ongoing trade tensions.