Chairman Rabbit on China-U.S. trade deal
A key pathway to resolving China-U.S. economic tensions lies in the U.S. producing more and China consuming more. While the former is a tall order, the latter is more achievable.
I just published a piece on Subtack summarizing Chinese official and media perspectives on the China-U.S. trade deal. Around the same time, Ren Yi, a prominent Chinese internet commentator better known by his online alias "Rabbit Chairman" or 兔主席 "Tù Zhǔxí" in Chinese, released an in-depth analysis of the deal and its implications for future trade relations on his WeChat blog.
Bloomberg and The Economist have used the term “well-connected” to describe the Harvard-educated former research assistant to Ezra Vogel. Over the past month, Rabbit Chairman has consistently offered exclusive insights into China’s position in the tariff dispute, which I’ve been closely following. I thought it would be helpful to introduce his latest article to you :
1. Current Outcome
United States:
1) Former President Trump’s “reciprocal tariffs” have been scaled back to 10%. On what he once called “Liberation Day,” he had imposed a 34% tariff hike on Chinese goods. Following the latest talks, 24% of these are suspended for the next 90 days, leaving only 10% in effect.
2) Earlier, Trump imposed a 20% tariff on Chinese goods citing fentanyl-related concerns, and that tariff remains in place. Combined with the newly retained 10%, the total now stands at 30%. （20%+10%=30%）
3) On top of this, the Trump administration’s first-term tariffs on China—largely preserved under President Biden—still apply. These vary by sector and product, averaging roughly 20% after eight years of supply chain adjustments.
A reasonable estimate is that the Trump administration’s second-term tariffs on China now amount to around 30%.
China:
1) China has reciprocated with a 10% tariff on U.S. imports—mirroring Trump’s retained 10%. Previously, China had countered Trump’s 34% hike with its own 34% retaliation, but 24% of that has now been suspended for 90 days.
2) Beijing has maintained other targeted countermeasures: 10–15% tariffs on select U.S. agricultural, meat, and dairy products; suspension of timber imports; reduced quotas for American film imports; and expanded export controls—all in response to U.S. policies.
This measured response underscores China’s pragmatic and restrained approach, a consistent strategy since the start of the trade war. However, the abrupt escalation by Trump prompted a swift, proportionate retaliation.
This time, Trump rolled back the most extreme and irrational portion of his “reciprocal tariffs,” while keeping a 10% levy in place—leaving room for further negotiations.
For now, stakeholders—U.S. consumers and businesses, Chinese exporters, capital markets, both governments, and third parties—can take a collective sigh of relief and regroup for the next phase.
2. Short-Term Impacts
United States:
1. Trump: Politically, this is a major setback. While Trump and his aides will try to spin this as a “strategic win,” the reality is evident: walking back tariffs is a clear loss, exposing his impulsiveness and undermining his authority.
2. Within the Administration: This represents a quiet victory for the pragmatic wing. From Treasury Secretary Bessent to external allies like Elon Musk and Bill Ackman, many will publicly support Trump’s “wisdom” while privately crediting moderate advisors. Having managed and guided Trump through this reversal, they now have increased leverage and a playbook for future interventions.
3. Capital Markets: A temporary de-escalation in U.S.-China trade tensions triggered an immediate rally. Wall Street has drawn several lessons:
Trump is unpredictable and unreliable.
The “Trump put” still holds—markets can pressure him into reversals.
Investors must neither underestimate his resolve nor overestimate his competence.
4. Importers & Retailers: With tariffs suspended, importers will likely launch a wave of “revenge importing” to stock up for the year. Supply chain disruptions have created space for opportunistic price hikes, adding to inflationary pressure.
5. U.S. Firms Operating in China: With negotiations unresolved, uncertainty remains. But one thing is clear: Trump is capricious. Companies should avoid overreacting and instead proceed cautiously.
6. American Consumers: They’re breathing a sigh of relief and rushing to stock up at Walmart, Amazon, and Chinese cross-border e-commerce platforms.
7. Trump’s Base: Despite all the noise, Trump has achieved no real gains. His base isn’t blind—they can see the setbacks, the absence of a trade deal, and the elusive promise of manufacturing revival. The political damage is real. Republicans may pay a price in the midterm elections.
China:
China has delivered a well-calculated counterstrike—both forceful and restrained. This episode not only showcases Beijing’s measured strategy but also exposes the irrationality of Trump’s approach. Despite having imposed fewer tariffs this year than the U.S., China still appears the more rational actor, prioritizing global stability and predictability.
By de-escalating, Beijing has protected its export sector from immediate shocks and created room to focus on higher priorities.
3. The Next Phase of Trade Talks
As the initiator of this round of trade tensions, Washington is likely to shift focus to negotiations with other partners—including Japan, South Korea, and India. Trump’s advisors are expected to pursue several objectives:
1) Leverage the pause in China tensions to secure better deals elsewhere.
2) Form a coalition with allies to apply joint pressure on Beijing.
3) Relegate China to the bottom tier of a “tiered tariff” system.
4) Lay the groundwork for long-term decoupling or “de-risking” while minimizing short-term economic pain.
What unfolds within and beyond the 90-day window will depend on U.S.-China negotiations and trilateral dialogues involving third-party economies and trade blocs.
4. Medium-to-Long Term Outlook
U.S.-China economic ties are too deep to fully sever, but mutual de-risking is inevitable. Both sides seek to reduce dependency on the other.
If there is one shared strategic interest, it is ensuring a smoother, more manageable transition that avoids destabilizing global markets.
U.S. considerations:
1. American businesses have now seen how geopolitical shifts disrupt supply chains. While they may not leave China entirely, they will diversify—relocating some operations to third countries over time.
2. This won’t mean a manufacturing renaissance at home. Trump’s goal of “bringing jobs back to America” remains more illusion than reality.
3. In Washington, the political and corporate elite are converging on a more actionable, mid-to-long-term containment strategy. Trump’s role is largely functional—accelerating this process.
4. However, U.S. policymakers still lack consensus on how to revive domestic industry. From semiconductors to shipbuilding, real policy breakthroughs remain elusive.
China’s approach:
1. Reduce reliance on U.S. export markets, including expanding rerouting via third countries.
2. Deepen export diversification.
3. Strengthen broad-based cooperation with other trade blocs—particularly the EU—to reduce bilateral friction.
4. Expand domestic demand, making it a national strategy. By stimulating internal consumption—especially in services—China can absorb domestic capacity and advance structural transition.
A key pathway to resolving U.S.-China economic tensions lies in the U.S. producing more and China consuming more. While the former is a tall order, the latter is more achievable. China's institutional capacity for long-term planning gives it a strategic edge. This trade conflict may in fact accelerate China’s economic transformation.