U.S.-China tariff truce unravels amid renewed accusations and strategic deadlock

Hopes for a lasting resolution to the US-China trade conflict are fading just weeks after a temporary truce was struck.

The fragile 90-day agreement to reduce tariffs, reached last month in Geneva, has come under strain following accusations by U.S. President Donald Trump that Beijing has breached the deal.

Speaking earlier this week, Trump claimed China had “totally violated” the accord, offering no specific evidence but reigniting tensions that had briefly subsided. He described Chinese President Xi Jinping as “extremely hard to make a deal with,” a statement that drew an immediate response from Beijing. Chinese officials countered that the US had imposed “discriminatory and restrictive measures” since the Geneva talks, referencing new export controls on chip design tools and warnings about artificial intelligence chips from Chinese tech giant Huawei.

Under the original deal, the US had agreed to reduce tariffs on Chinese goods from 145% to 30%, while China lowered its retaliatory duties from 125% to 10%. The aim was to provide temporary relief to both economies and offer space for further negotiations. But disputes over key strategic resources—particularly rare earth minerals—have caused the talks to stall.

U.S. policymakers have expressed frustration with delays in China’s export license approvals for rare earths, which are critical to high-tech manufacturing, defense, and green energy industries. China controls over two-thirds of the global rare earth supply and nearly 90% of processing capacity. Confusion persists over what was agreed in Geneva, with U.S. officials reportedly believing that China would lift all export licensing requirements, a claim Beijing disputes.

Michael Hart, president of the American Chamber of Commerce in China, told the Financial Times that although rare earth approvals have been issued to some US automakers, the process remains slow and understaffed. “Only a handful” of Chinese officials are reportedly handling thousands of applications, further aggravating US concerns.

The broader U.S. agenda includes reducing its $295 billion trade deficit with China, eliminating non-tariff barriers, and ending currency manipulation. Trump has also linked trade issues to other contentious topics, demanding that China crack down on precursor chemicals used in fentanyl production and curb illegal immigration flows.

Despite these demands, negotiations have reached an impasse. U.S. Treasury Secretary Scott Bessent acknowledged that talks have “stalled,” and it remains unclear whether a planned phone call between Trump and Xi, tentatively scheduled for this week, will proceed. The White House described the call as “likely,” though Chinese officials have yet to confirm.

Analysts remain sceptical. Antonio Fatas, economics professor at INSEAD, noted, “Trump’s typically the one who calls people and tells them what to do. But with a powerful player like China, that’s not going to work.” There is speculation that China may postpone the call as part of its strategic posture.

Meanwhile, the legality of Trump’s sweeping tariffs remains in limbo. A recent U.S. trade court ruling deemed them unlawful, though a higher court has reinstated them pending further review. The Biden administration, which had initiated early-stage talks with China, now finds its trade agenda overshadowed by a pending Supreme Court case and intensifying investor anxiety.

Economists warn that prolonged tariff uncertainty could derail broader strategic goals. While the U.S. aims to maintain technological dominance, the ongoing trade conflict is draining resources from research and development. American firms report rising costs and restructured supply chains, leaving less room for innovation. In contrast, China continues to accelerate state investment in emerging technologies such as AI, advanced semiconductors, and 6G networks.

“China has now caught up on most of the technological advantage the US thought it had,” said Penny Naas of the German Marshall Fund. “U.S. companies say they’re falling behind while spending all their time on reorienting supply chains.”

As the August 12 deadline for the tariff pause approaches, both sides remain entrenched. Without a clear compromise, observers fear the standoff could intensify, with economic and geopolitical consequences extending far beyond trade.

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