Xi gains leverage before Trump summit after tariff reversal
Weeks before Trump arrived in Beijing on March 31, the first visit by an American president since his last visit in 2017, the Supreme Court invalidated his broad emergency tariffs; This is an important point of leverage over China. This eliminated Trump’s second-term tariffs on China and left Beijing facing the same 15 percent global fee imposed on U.S. allies; This rate comes with a 150-day expiration date.
The disappearance of tariff threats, which rose as high as 145% last year, led to Trump offering Xi more soybeans, Boeing Co. It will make it harder for him to push for aircraft and energy purchases. It also leaves him without a key weapon to respond if Chinese negotiators make new demands in exchange for allowing a steady flow of rare earth metals vital to U.S. production.
“Ultimately, this Supreme Court decision puts China in a much stronger bargaining position,” said Wu Xinbo, director of the Center for American Studies at Fudan University, citing China’s commitment to buy about 25 million tons of soybeans based on previous tariff negotiations. “If these tariffs are now deemed illegal, the ‘soybean card’ will return to China’s hands.”
Wu, who previously advised the State Department in Beijing, added that Xi’s team will also likely push harder for access to advanced semiconductors, lifting trade restrictions on Chinese companies and reducing U.S. support for self-governing Taiwan, where Beijing has focused on using stronger language on opposing arms sales and the island’s independence. The Chinese Communist Party considers democratic Taiwan to be its own territory, although it has never governed it.
While Trump’s defeat is a victory for Xi, Chinese officials, like others around the world, are cautious in their response. Beijing’s Foreign Ministry did not respond to a request for comment during a long public holiday, and state media were restrained in their coverage of the decision.
According to Cui Fan, a former adviser to China’s Ministry of Commerce, Beijing will consider relevant measures if the United States continues to impose new tariffs using other legal tools. Yuyuantantian, a social media account affiliated with China’s state broadcaster, noted that the opposite is also true and that the possibility that adjustments would be made if the US actually lowers tariffs cannot be ruled out. Mainland China’s markets are closed for the Lunar New Year holidays and will reopen on Tuesday, and investors may react positively to the tariff news.
“Consumption remained strong throughout the holiday, which will boost market sentiment through the consumer sector,” said Shen Meng, director of investment bank Chanson & Co. in Beijing. “Some export-oriented companies will also be on an optimistic note due to the short-term tariff decision and the impact of Trump’s visit to China.”
BloombergWendy Cutler, senior vice president of the Asia Society Policy Institute and former acting U.S. Trade Representative, said Trump could rely on Sections 301, 232 and 122 of the Trade Act to advance the tariff regime. The 15 percent global rate set by Trump falls under Section 122. The other two powers allow the president to unilaterally impose tariffs, but only after investigations that usually last months.
China still faces a Section 301 investigation over its compliance with the Phase One trade deal from Trump’s first term, when Beijing failed to honor purchase agreements. That investigation could be “an important feature of the backup plan for Beijing,” Cutler said.
Additionally, Trump could expand the use of export controls if China restricts rare earth magnets. Beijing’s agreement to reorder the flow of vital supplies comes after the United States cut sales of chip design software, jet engines and spare aircraft parts.
Shen Dingli, an international relations expert in Shanghai, said China will continue to honor the existing bilateral trade agreement rather than force the United States to make immediate corrections.
“Chinese officials are likely to keep a low profile to ensure that Donald Trump’s visit to China in April goes smoothly,” Shen said. “Even as Chinese people celebrate, authorities will likely exercise some degree of control over the narrative.”
While the Chinese side has more room to negotiate, Trump threatened new tariffs to gain leverage ahead of key meetings and did so before his last summit with Xi in October. Although unclear, the threat of additional 100% tariffs on China has shaken stock markets and commodities.
Zhou Mi, a senior researcher at a think tank affiliated with China’s Ministry of Commerce, said the Supreme Court decision will not lead to a fundamental reversal in Sino-US economic and trade relations.
“Of course, such a decision does not prevent the Trump administration from using other forms of executive authority to achieve trade and other policy goals,” Zhou said. Still, “this is a reminder to all countries that under no circumstances can executive power be exercised beyond the scope for which it was originally authorized.”
Chinese trade officials are set to meet with Treasury Secretary Scott Bessent ahead of Trump’s visit to determine the outcomes of the trip, but the date or location has not yet been publicly announced.
The court’s removal of the 10 percent fentanyl tariff and so-called “reciprocal” taxes removes a major sticking point between the countries as the White House tries to restructure the taxes in another way. They began lifting national security restrictions in talks last year and reached a deal on TikTok’s U.S. operations after the Trump administration greenlit the sale of Nvidia Corp.’s H200 chips, a more advanced version than previously allowed.
Ahead of the Trump-Xi talks, a top executive at Ford Motor Co. spoke with senior Trump administration officials about a potential framework under which Chinese automakers could offer some protection to domestic companies while producing cars in America, Bloomberg reported earlier this month. While such a move is likely to face congressional opposition as midterm elections approach, any agreement to allow more Chinese investment in the United States would represent a significant breakthrough on a sensitive issue.
BloombergZhiwei Zhang, chief economist at Pinpoint Asset Management, said Chinese exporters may choose to speed up shipments to the U.S. while tariffs are low and more changes are coming.
“The US administration will probably look for alternative ways to keep customs duties on imports from China high,” Zhang said. “But it may take time to investigate and implement such alternative tariffs. If this is the case, we could see firms front-loading their exports to the US in the coming months to take advantage of lower tariffs, as these may only be temporarily lower.”
Zheng Tao, a Chinese auto parts export trader with more than 70% of his revenue coming from U.S. companies, said the decision was “good news” and would encourage more orders, but he was unsure whether he had more bargaining power over prices after cutting prices last year to protect American customers.
Others saw the Supreme Court’s decision as the latest stir in a year of policy uncertainty and turmoil.
Lin Qian, who runs factories producing toys mostly for American customers in the rapidly developing Shenzhen in southern China and Vietnam, remained indifferent to the Supreme Court decision. He said the constant change in policies confuses business people. While its facilities in China were still processing the bulk of orders, it increased production at its new Vietnam factory last September as Sino-US tensions continued.
“We need to have plans A, B and C for such dynamic conditions,” he said.
