By Qaiser Nawab
Chairman, Belt and Road Initiative for Sustainable Development (BRISD)
Following months of intensifying economic friction, the United States and China reached a provisional truce in Geneva, agreeing to a 90-day suspension of additional tariffs. This agreement marks a significant recalibration between the world’s two largest economies. The establishment of a joint economic working group—tasked with addressing trade, investment, and technology-related issues—is a cautiously optimistic step toward stabilizing a relationship that has grown increasingly fraught in recent years. While the agreement falls short of a comprehensive resolution, it reflects a vital return to economic realism at a time when global markets desperately need clarity and confidence.
Despite growing political tensions and strategic competition, the U.S.–China relationship remains fundamentally economic. In 2024, their bilateral trade surpassed $582.4 billion, making it clear that full-scale economic decoupling is neither viable nor desirable. The intricacy and depth of interdependence between the two nations are difficult to overstate. China remains central to the global supply chain, particularly in sectors such as semiconductors, rare earths, solar energy, and consumer electronics. Meanwhile, the United States remains a critical destination for Chinese exports and a significant source of capital, innovation, and advanced technology.
The current tariff confrontation—rekindled by the re-election of President Trump in 2025—was initiated by the United States through new tariffs targeting Chinese electric vehicles, renewable energy technologies, and strategic minerals. These measures were intended to reassert U.S. industrial competitiveness and curb dependence on Chinese imports. However, they have also produced unintended consequences: rising consumer prices, supply chain disruptions, and inflationary pressures at home. U.S. manufacturing sectors now face increased input costs, and businesses must grapple with the challenge of finding viable alternatives to Chinese suppliers, particularly in high-tech and clean energy domains.
For instance, many American firms reliant on lithium-ion batteries and photovoltaic modules have seen delays and price hikes in their production lines due to the difficulty of sourcing comparable components elsewhere. Southeast Asia and Latin America, often touted as alternative manufacturing hubs, lack the scale, infrastructure, and integrated ecosystem that China offers. This reality has reinforced the notion that replacing China, particularly in high-volume, high-efficiency industries, remains a long-term aspiration rather than an immediate solution.
U.S. trade policy under the current administration has been marked by abrupt shifts—tariffs, export bans, and subsidy-heavy domestic policies like the Inflation Reduction Act. While aimed at boosting domestic industry, such moves have injected uncertainty into the global economic system. Stock markets have reacted with unease to sudden policy announcements, while multinational corporations operating across U.S.–China corridors have grown more cautious in their investment decisions.
This volatility has not only impacted bilateral trade but has also shaken investor confidence in broader supply chains. For example, investment in high-tech sectors in the U.S. has slowed due to concerns about long-term access to critical inputs sourced from China. Meanwhile, financial markets in Asia and Europe have become increasingly sensitive to signals emanating from Washington and Beijing, knowing that even a small policy misstep could cause ripple effects across global portfolios.
Countries like Pakistan, Indonesia, Brazil, and Nigeria—integrated into global supply chains or dependent on commodity exports—have felt the economic aftershocks of these disputes. Commodity prices have become more volatile, infrastructure investments have been delayed, and industrial planning has become more complex in light of uncertain trade conditions.
Charting a Path Forward
The 90-day tariff suspension provides a brief window of stability. The success of the newly announced joint economic working group will depend not only on regular dialogue but also on transparency, consistency, and the political will to prioritize economic cooperation over ideological posturing. If institutionalized properly, the working group could become a platform for resolving technical issues, reducing reactive policymaking, and guiding future trade governance frameworks.
As we look forward, the focus should not be on rivalry but on resilience. The U.S.–China economic dynamic is not a zero-sum game. Rather, it is a reflection of the complex interdependence that defines the modern global economy. Both sides must recognize the costs of prolonged confrontation—not just for themselves, but for the entire international system.
The Geneva truce is a signal that even amidst political hostility and nationalist rhetoric, economic logic still commands a place at the table. For policymakers, business leaders, and citizens across the world—especially in the Global South—this moment offers a reminder that engagement is preferable to escalation.
Rather than choosing sides in an ideological contest, countries should focus on building diversified, inclusive, and sustainable economic partnerships.
About Author
Qaiser Nawab is Chairman of the Belt and Road Initiative for Sustainable Development (BRISD), a youth policy advocate, and a contributor to multilateral forums on global economic cooperation.
