President Xi Jinping’s government has provided a significant boost to China’s economy ahead of key trade talks with the US, unveiling a series of measures designed to strengthen Beijing’s negotiating position in upcoming discussions that could redefine international trade relations.
Massive Economic Measures on the Eve of Negotiations
Just hours after confirming that Vice Premier He Lifeng will travel to Switzerland for weekend meetings with US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer, China’s central bank Governor Pan Gongsheng announced across-the-board interest rate cuts. These and other measures could pump 2.1 trillion yuan ($291 billion) into the economy, representing the most significant economic easing by China since Trump’s “reciprocal” tariffs unleashed a trade war.
Negotiating Positions of Both Sides
Both powers enter the weekend negotiations with demonstrative confidence:
- Trump said in a recent interview with NBC that “China’s getting killed right now”
- Bessent has called the US 145% tariff “unsustainable” for export-oriented China
- Beijing presents the talks as a US initiative while declaring readiness to “fight to the end”
Nevertheless, both sides have strong motivation to discuss tariff reductions after weeks of standoff that threatens to sever trade links between the world’s largest economies. The mere announcement of high-level talks has already generated optimism in financial markets in both China and the US.
Possible Outcomes and Expectations
“You don’t send such high-ranking officials all the way to Europe only to have the outcome be essentially nothing,” commented Sean Stein, president of US-China Business Council. “Both sides have made a courageous political decision to meet, but now expectations are high.”
One realistic outcome could be a 90-day pause on most punitive tariffs, bringing the rate back down to 20%. This would mirror Trump’s approach to other nations and come close to Beijing’s demand for lifting all unilateral tariffs during negotiations.
Economists remain cautious, however. HSBC Holdings analysts predict a reduction of tariffs to 50%, while Morgan Stanley expects a more “gradual approach.” Even these levels would still threaten the majority of US-China trade, requiring further Chinese monetary and fiscal stimulus to achieve the growth target of around 5%.
China’s Proactive Response
The timing of Wednesday’s measures signals that Beijing is increasingly determined to stimulate the domestic economy. Unlike similar episodes in the past, the People’s Bank of China cut almost every interest rate it controls. Premier Li Qiang called for a change in approach back in March: “Policies should be implemented as soon as possible. It is better to act early than late.”
Although direct commercial flows between the US and China have plunged over the past month, China’s overall trade and exports have held up thanks to shifting goods to other countries. Purchasing managers’ index surveys, however, already point to a slowdown in economic activity.
Political Context of the Negotiations
The talks have given China a clear negotiator – something Beijing wanted that could pave the way for an eventual Trump-Xi call that the US leader has been seeking since his January inauguration.
The difficulty for Chinese negotiators is that Trump remains the key “decider” in any deal. As Deborah Elms from the Hinrich Foundation notes: “You might spend weeks negotiating intensively with people like Greer or Bessent – and then ultimately Trump changes the parameters.”
Working out an agreement that satisfies Trump’s goal of rebalancing trade between both countries will likely take months, meaning China’s economy faces a longer period of uncertainty despite current stimulus measures.
