US-China trade detente would limit tariff blow for both: Study
FILE PHOTO: If the US drops the 20% fentanyl-related tariff on China but maintains sectoral levies and a 10% reciprocal rate, China would lose less than 10% of its exports to the US versus a projected slump of 70% if tariffs remain at today’s levels, economists Maeva Cousin and Rana Sajedi write in a note
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Dado Ruvic
A trade detente agreed between US President Donald Trump and his Chinese counterpart Xi Jinping would limit the tariff blow to both economies and see Beijing maintain the bulk of its exports to America, Bloomberg Economics writes.
If the US drops the 20 per cent fentanyl-related tariff on China but maintains sectoral levies and a 10 per cent reciprocal rate, China would lose less than 10 per cent of its exports to the US versus a projected slump of 70 per cent if tariffs remain at today’s levels, economists Maeva Cousin and Rana Sajedi wrote in a note. The hit to US gross domestic product would shrink to 0.5 per cent in that scenario, they said.
The prospects of such an outcome has cheered global markets after a framework agreement was reached over the weekend ahead of a meeting of the presidents of the world’s two largest economies in South Korea set for Thursday.
After talks in Malaysia wrapped up Sunday, a Chinese official said a preliminary consensus was reached on topics including export controls, fentanyl and shipping levies. US Treasury Secretary Scott Bessent later said Trump’s threat of 100 per cent tariffs on Chinese goods “is effectively off the table” and he expected China to make “substantial” soyabean purchases and defer sweeping rare earth controls.
Bloomberg Economics also modelled two other scenarios:
- China alone: “As overcapacity from Beijing’s industrial policy spills out, the rest of the world imposes US-style tariffs” and China retaliates. This scenario would see China lose as much as 4 per cent of GDP by 2030.
- Fortress North America: “The US, Mexico and Canada form a closer bloc, dropping tariffs on one another but raising them against all others” and everyone else retaliates. Canada and Mexico would take the biggest hit and China would lose its tariff-free back door to the US in this scenario.
As things currently stand, the current patchwork of tariffs means US importers face an average duty of close to 16 per cent from just above 2 per cent a year ago.
“By pulling away from global trade, the US could be the biggest loser, with a GDP hit of 0.7 per cent by 2030,” according to Cousin and Sajedi. “Any gains in domestic manufacturing are likely to be outweighed by losses in services and higher input costs, leaving the economy worse off overall.”
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Published on October 28, 2025
