Navigating Tensions and Tariffs: The Ongoing U.S.-China Trade Negotiations

By C Thakur The U.S.-China trade relationship, often described as the most consequential bilateral economic relationship of the 21st century, remains in flux as both powers continue delicate and complex negotiations. What began as a trade war under the Trump administration—with waves of tariffs, counter-tariffs, and decoupling rhetoric—has now evolved into a more intricate geopolitical contest, with technology restrictions, supply chain security, and strategic dominance shaping the contours of trade dialogue. As of 2025, the Biden administration’s successor has maintained a hardened stance on China, reflecting the bipartisan consensus in Washington that Beijing poses not just an economic challenge, but a broader strategic one. For China, the stakes are equally high. Its economy is under strain due to demographic pressures, a slow post-COVID recovery, and increased dependence on domestic consumption amidst curtailed access to Western technology. Trade Tensions: A Shift in Objectives The ongoing trade negotiations are no longer centered on the traditional themes of tariff reduction and market access alone. Instead, they reflect a more complex matrix of issues including: Technology Controls: The U.S. has imposed stringent export controls on advanced semiconductors, artificial intelligence chips, and related manufacturing equipment. These measures aim to curb China's access to dual-use technologies that could aid its military modernization. China has retaliated by restricting exports of critical minerals such as gallium and germanium—vital for chipmaking. Supply Chain Realignment: Washington is actively promoting "friend-shoring" and "de-risking" strategies—terms that signify moving critical supply chains away from China and toward more trusted allies in Southeast Asia, India, and Latin America. This has added a structural layer of friction to trade talks, as China sees it as a long-term threat to its manufacturing base. Intellectual Property and Data Sovereignty: Disputes over IP theft, forced technology transfers, and China's restrictive digital policies remain unresolved. While these were core issues in the original trade war, they have now expanded into concerns over data flows, cybersecurity, and digital surveillance. Ongoing Negotiations: Cautious Engagement The current round of trade talks—resumed after an 18-month diplomatic freeze—has seen both sides engage cautiously. U.S. Trade Representative Katherine Tai and her Chinese counterpart, Commerce Minister Wang Wentao, have held a series of backchannel and formal discussions focused on reviving channels of communication and resolving immediate irritants. So far, outcomes have been limited to modest technical agreements, such as: Resumption of some agricultural trade flows, particularly soybeans and pork, which are critical to U.S. Midwest farmers and Chinese food security. Renewed discussions around WTO reform and bilateral tariff rollback mechanisms on select consumer goods. Reengagement of a dormant trade working group to facilitate dialogue between industry leaders and regulators. However, broader deals remain elusive, especially on high-tech tariffs and subsidies. The U.S. remains committed to its CHIPS and Science Act, which offers subsidies to American semiconductor firms to reduce dependence on Chinese manufacturing. China, in turn, has doubled down on its “Made in China 2025” strategy, aiming to achieve self-sufficiency in critical technologies. Domestic Pressures on Both Sides Both Beijing and Washington are negotiating under significant domestic constraints. In the United States, the administration faces pressure from labor unions and manufacturers to maintain a tough line on China. The political climate, particularly in the lead-up to the 2026 midterm elections, leaves little room for compromise that could be perceived as “soft on China.” A key concern remains the trade deficit, which has narrowed slightly but remains substantial, feeding into the narrative of an imbalanced relationship. China, meanwhile, is dealing with a slowing economy, rising youth unemployment, and an increasingly wary private sector. The property market slump and local government debt issues have compelled the Chinese Communist Party to prioritize economic stability. Yet, any perception of yielding to U.S. pressure risks being seen as political weakness at home, especially under President Xi Jinping's highly centralized leadership. The Role of Global Partners Notably, third parties—especially the European Union, Japan, and ASEAN nations—are watching closely. While some of them are being courted as alternatives to Chinese supply chains, they also have deep economic ties with Beijing. These nations are increasingly drawn into choosing sides, or at least hedging carefully between the two giants. Multilateral settings like the G20, APEC, and WTO are emerging as arenas where broader consensus on trade rules, subsidies, and tech governance may help shape or complement bilateral efforts. However, given the strategic mistrust between the U.S. and China, these forums are limited in their effectiveness. What Lies Ahead? The road ahead for U.S.-China trade negotiations remains uncertain. While open conflict is unlikely, strategic competition now defines the relationship more than cooperation. Any agreement will likely be piecemeal and transactional, rather than a sweeping resolution like the Phase One deal of 2020. The future of trade between the world’s two largest economies depends on whether both sides can compartmentalize their economic interests from their geopolitical rivalry. For now, both governments seem to prefer a framework of managed competition—where de-escalation and minimal cooperation are pursued not out of goodwill, but necessity. As the global economy recalibrates around this great power rivalry, businesses, allies, and international institutions will have to adapt to a new, more complex era of trade diplomacy—one where competition, not convergence, is the default setting.