Trump’s recent “total reset” in trade terms with China has sparked market surges, but experts warn the economic chess match between the world’s two largest economies may be strengthening China’s global position in unexpected ways.
At a Glance
- US and China agreed to significant tariff reductions, with the US lowering tariffs from 145% to 30% and China reducing tariffs on US goods from 125% to 10%
- Share markets surged after the announcement, with major US indexes seeing significant gains
- Some tariffs have been suspended rather than canceled, with the possibility of them rising again if no further progress is made
- China has expanded its global market reach through initiatives like Belt and Road while increasing domestic R&D to achieve tech self-sufficiency
- Tariff “stacking” has pushed actual import costs above 30%, impacting American consumers and retailers
Market Reaction to US-China Tariff Agreement
Share markets worldwide surged after President Trump announced what he called a “total reset” in trade terms between the United States and China. The agreement includes significant tariff reductions, with the US lowering tariffs from 145% to 30% and China reducing tariffs on US goods from 125% to 10%. This news immediately boosted major US stock indexes, with the S&P 500, Dow, and Nasdaq all registering substantial gains. European and Hong Kong markets also rose, while shipping companies like Maersk and Hapag-Lloyd saw particularly significant increases in their stock prices.
“We’re not looking to hurt China,” President Trump stated, though he added that China was “being hurt very badly.”
However, market analysts note that some tariffs have been suspended rather than permanently canceled, with the possibility of rates rising again in three months if no further progress is made in negotiations. The US has maintained a 20% tariff specifically to pressure China on illegal fentanyl trade issues. Business leaders and exporters in China remain cautious about the agreement’s long-term implications.
China saw US tariffs coming. China's trade surplus with the US collapsed in April (black), but its surplus with other countries began rising in Jan. '25 and more than offsets that fall (blue). US tariffs trapped a wall of goods in China that need to get out. They are getting out. pic.twitter.com/NeRUvH30Lj
— Robin Brooks (@robin_j_brooks) May 10, 2025
China’s Adaptive Economic Strategy
While tariffs were intended to pressure China economically, evidence suggests they may be accelerating China’s global economic dominance. China has responded to trade restrictions by significantly expanding its global market reach through initiatives like the Belt and Road Initiative (BRI) and what some analysts call a “string of pearls” strategy. These initiatives aim to secure new markets and resources while reducing dependence on traditional Western trading partners, particularly the United States.
“US President Donald Trump has suddenly sent the world into upheaval by increasing tariffs on all countries that export to the US,” notes an analysis from Fair Observer.
China has expanded trade with countries including Saudi Arabia and Russia, increasingly conducting bilateral trade using local currencies rather than the US dollar. It has also strengthened its position in international organizations, playing a leading role in BRICS and deepening ties with ASEAN nations. These moves effectively allow China to bypass some of the negative impacts of US-imposed tariffs while building alternative economic relationships.
This was the rise in tariffs before Trump’s infamous tariff announcement in April … effective US tariffs on a China hiked from about 10% to 26% in March https://t.co/l99oODoFIZ
— Charlie Robertson (@CharlieTTEcon) May 8, 2025
Technological Self-Sufficiency Push
US concerns over China’s technological advancements, particularly in 5G and semiconductor technology, have led to additional restrictions, including pressuring allies to ban Chinese tech companies and restricting sales of advanced chips to China. Rather than slowing China’s tech sector, these moves have accelerated China’s push for technological self-sufficiency. China has significantly increased its research and development spending with the explicit goal of achieving independence in high-tech manufacturing.
— Hudson Institute (@HudsonInstitute) May 10, 2025
Impact on American Consumers and Businesses
While recent agreements have paused the steepest tariffs, American businesses and consumers continue to feel significant impacts from what experts call tariff “stacking” – the cumulative effect of multiple import taxes that push actual costs well above the headline rates. Even with the latest reductions, tariff bills on consumer products like apparel, footwear, and backpacks range from 40% to 70% when all fees are calculated.
“These are everyday shoes — not luxury items — and applying compounded tariffs on them only drives up costs at the cash register,” explains Matt Priest from CNBC.
Major retailers including Walmart have announced price increases directly attributable to tariff stacking, affecting basic items that American families purchase regularly. Business owners express uncertainty about future tariff decisions, complicating their financial planning and operations. The tariffs disproportionately impact working-class consumers who rely on affordable imported goods. Meanwhile, China continues to adapt its economic strategy, potentially emerging stronger in global markets despite – or perhaps because of – the tariff pressures.
