• US Treasury Secretary Scott Bessent signals China holds the key to further tariff de-escalation.
  • The 90-day suspension of tariff increases, agreed in May 2025, is set to expire around August 12.
  • Without a new deal, tariffs could revert to 34%, reigniting trade tensions between the two economic giants.

A Pivotal Moment in US-China Trade Relations

US Treasury Secretary Scott Bessent stated that the next phase of the US-China tariff dispute will largely depend on China's actions, though he expressed cautious optimism that both sides can maintain the current de-escalation. The remarks come as the clock ticks down toward the August 12 expiration of a temporary tariff truce struck in Geneva earlier this year.

Under the May 2025 agreement, reciprocal tariffs were rolled back from a peak of 145% to a combined 30% (10% reciprocal and 20% fentanyl-related duty). The 90-day suspension provided breathing room for negotiations, but with the deadline looming, markets are growing increasingly attentive to whether an extension or more permanent deal can be reached.

"It's going to be up to the Chinese," Bessent said, according to people familiar with his comments. "We think we can keep this de-escalation under control." The Treasury Department did not immediately respond to requests for further clarification.

Economic and Political Stakes

The temporary reprieve has been welcomed by US manufacturers and exporters hit hard by China’s retaliatory measures, though import-reliant businesses remain wary of the uncertainty beyond mid-August. In China, the agreement has been seen as a partial victory for exporters, but pressure is mounting for deeper structural reforms in the real estate sector and domestic consumption.

Analysts note that the August 12 deadline coincides with heightened political sensitivities in both countries. The US presidential election cycle is intensifying, while Chinese policymakers are grappling with internal economic challenges. "Neither side wants a full-blown trade war right now," said one trade expert, speaking on condition of anonymity. "But the underlying tensions—oversupply, reindustrialization, and non-tariff barriers—haven’t gone away."

What’s Next?

If no agreement is reached by August 12, tariffs are set to rise back to 34%, though some observers believe an extension of the current terms is more likely than an immediate escalation. The outcome will not only shape bilateral trade but could also influence global supply chains and allied economies navigating the US-China rivalry.

Efforts to reach Chinese officials for comment were unsuccessful. Market watchers will be scrutinizing any signals from Beijing in the coming weeks, as the deadline draws nearer.