Navigating the Tensions: China and the US Trade Showdown Amid Deepening Economic Strains

China Faces Trade Showdown as Tariff Truce Masks Deepening Strains

By Bob Mason
Updated: September 11, 2025, 02:45 GMT

Overview

The US and China set a trade pause. This break stops a steep tariff rise now. Under this calm, hard disputes grow. Tariff conflicts, supply chain issues, and rare earth problems still trouble both sides. These fights stress China’s plans for steady growth and shake market trust.

Trade Truce Extension: A Temporary Pause

In August 2025, US and China extended their trade calm for 90 days. This step stops the start of a 145% tariff on many Chinese goods. The pause does not solve other trade issues. In Geneva, both sides met for two days. China agreed to lift some limits on rare earth exports. The US agreed to ease rules on semiconductor chips. Later talks in London and another break did little to clear mistrust or bring a full trade plan.

Rising Geopolitical Pressures

US moves against China get more complex. The US added tariffs to fight against goods sent through third countries. Firms forward goods from Vietnam and Indonesia to avoid steep fees. Vietnam now pays a 40% tariff on some shipments, and Indonesia pays a 19% fee. Vietnamese exports to the US dropped by 2% in August. At the same time, Vietnamese imports from China also fell by 2%. Rumors spread about US plans to require firm proof of product origin. Such steps could hurt China’s trade edge.

US officials also pressured the European Union to set 100% tariffs on some goods from China and India. This push aimed to cut Russian oil purchases and nudge Moscow on the Ukraine matter. The call came during a meeting of the Shanghai Cooperation Organization, where leaders like Russian President Vladimir Putin and Indian Prime Minister Narendra Modi appeared.

US officials reopened trade talks with India. Former President Trump spoke of ending trade blocks. This change may lower India’s Russian oil buys and shift how its economy links with China.

Chinese Economy Under Stress

Trade fights now hurt China’s economy. Its exports to the US fell 33% compared to last year in August. Growth slipped from 7.2% in July to 4.4% in August. Unemployment climbed from 5.0% to 5.2%, while jobless numbers among the young jumped from 14.5% to 17.8%. These shifts hit workers hard.

Lower sales in shops now worry many about hitting a 5% growth target. In response, the government plans new help for workers and trade. On September 10, the National People’s Congress met. Leaders stressed using the budget to bring back balance to the economy.

Economist Robin Brooks from the Brookings Institution said, "China loses ground. Its US exports dropped 24% in one quarter. Exporters must choose: shift goods or cut prices. Both paths hurt earnings and push prices down."

Mainland Markets Stay Steady

Despite the stress, Chinese stock markets hold up well. The CSI 300 and Shanghai Composite Index rose near 13%. The Hang Seng Index climbed over 30%. Local buyers and money from abroad keep the markets active.

Beijing works to keep the economy safe. Yet trade talks, a housing crisis, and weak local buying still risk the future. A shaky job market can slow spending and mind share.

A solid trade deal with the US might boost exports, raise company profits, grow jobs, and lift spending. That boost would support growth and push stocks higher.

The Road Ahead

Investors watch as China plans to share new data soon. Reports on retail sales and industrial output will appear on September 15. Those numbers will show if a small stumble starts a larger drop.

If spending and output rise, market hope may grow fast. Stocks could hit high levels in 2025. But if low news continues and prices fall, Beijing may miss its goals and need more policy moves.

With trade fights still burning and political stress on the rise, China stands at a turning point. How it balances trade plans and wins back market trust will shape its future and that of the global scene.

Contact: For more updates on the US-China trade scene and market views, stay tuned to FXEmpire.

Related Reads:

"China Ready for Global Pivot as US Trade Tensions Deepen Economic Risks"
"US Jobs Report Misses Forecast: Weak Nonfarm Payrolls Signal Labor Market Cooling"
"Surprise Drop in PPI Strengthens Case for September Fed Rate Cut"

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