National Economic Council Director Kevin Hassett expressed optimism on Sunday about a potential trade deal between the United States and China, with key negotiations scheduled for Monday in London.

Speaking on CBS’ Face the Nation, Hassett said he’s “very comfortable” that the deal will close soon, following President Donald Trump’s recent description of his conversation with Chinese leader Xi Jinping as “very good” and talks as “very far advanced.”

Restoring Crucial Trade Flows

A major focus of the deal is reopening the flow of rare earth minerals—essential components in electronics, electric vehicles, and military equipment—to levels seen before the trade war escalated in early April.

“Exports of critical minerals have improved, but they haven’t fully returned to the levels we agreed to in Geneva,” Hassett explained.

Leading the talks in London will be Commerce Secretary Howard Lutnick, Treasury Secretary Scott Bessent, and U.S. Trade Representative Jamieson Greer, who spearheaded recent negotiations in Geneva.

A Rocky Road: Trade War and Tariff Battles

Despite progress, tensions flared weeks ago after President Trump accused China on Truth Social of “totally violating” a 90-day trade agreement meant to ease the conflict. That deal had temporarily lowered U.S. tariffs on Chinese goods from a staggering 145% to 30%, while China reduced its tariffs on American imports from 125% to 10%.

China had also agreed to suspend various non-tariff retaliations, including restricting exports of rare earth minerals—a key point in this ongoing negotiation.

Tariffs Are Here to Stay

Since April 2, the Trump administration has imposed sweeping “reciprocal” tariffs on numerous trading partners, initially pausing and then setting them to a baseline of 10%. Hassett confirmed that tariffs will remain a part of the U.S. trade strategy going forward.

“You can be certain there’s going to be some tariffs,” he said, though he stopped short of revealing what the final baseline might be.

Commerce Secretary Lutnick, speaking earlier this year, echoed this, stating, “We will not go below 10%,” signaling that these tariffs are likely to be a long-term fixture.

Economic Impact and Revenue Gains

While the administration claims that tariffs place the burden on foreign countries, many businesses and economists warn they could harm American consumers and dampen spending. However, there is some good news: U.S. inflation slowed to its lowest in over four years in April, with consumer prices rising just 0.2%.

Hassett credits the tariff policy for helping to reduce inflation and increase government revenue. The Treasury Department reported a record $16.3 billion in customs duties collected in April alone, nearly doubling the $8.75 billion collected in March.

Since the start of the 2025 fiscal year (October 2024), total customs duties have hit $63.3 billion—over $15 billion more than the same period last year. The Congressional Budget Office (CBO) estimates that these higher tariff revenues could reduce the federal deficit by as much as $3 trillion over the next decade, although this doesn’t factor in broader economic effects.

Budget and Deficit Outlook

The U.S. government ran a $2 trillion deficit in 2024, roughly 7% of GDP. Meanwhile, House Republicans’ recent legislation to enact President Trump’s policy agenda could add $3.8 trillion to the nation’s $36 trillion debt, according to the CBO.

Bottom line: While challenges remain, the Trump administration is pushing hard to seal a trade deal with China that would ease tensions, restore critical mineral flows, and maintain tariffs as a key economic lever—hoping to boost revenue and reduce the deficit amid a complicated global trade landscape.

Source: CNN – Trump economic adviser ‘very comfortable’ with a trade deal closing with China on Monday

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This week, U.S. President Donald Trump’s top trade officials will meet with their Chinese counterparts in Geneva to discuss the future of the ongoing trade war between the two largest economies in the world. The stakes couldn’t be higher: the global economy’s future hinges on the success of these discussions.

A Temporary De-Escalation, Not a Trade Deal

While the trade talks mark the first in-person meeting between U.S. and Chinese officials since the tariff battle intensified in March, expectations for an immediate breakthrough are low. Treasury Secretary Scott Bessent indicated that these talks are not about finalizing a trade deal, but rather about de-escalating the situation before more damage is done.

Trade between the two countries has already taken a hit, with tariffs reaching record levels. The U.S. has imposed a 145% tariff on many Chinese imports, while China has retaliated with a 125% tariff on American goods. As the first wave of tariff-free shipments is unloaded, businesses now face a tough decision: absorb the new costs or stop selling altogether. Consumers will soon feel the impact, with prices expected to rise and potential shortages on the horizon.

Economic Pain on Both Sides

The tariffs are taking a toll on both economies. In the U.S., the first quarter saw a rare contraction, marking its first decline in three years. Businesses scrambled to stockpile goods ahead of the tariffs, contributing to the slowdown. Meanwhile, China’s factory activity shrank sharply in April, with its government likely to introduce additional stimulus measures to combat the downturn.

Though the U.S.-China trade conflict is the most aggressive, Trump has extended tariffs to most other countries as well, including a 10% tariff on nearly all imports and 25% tariffs on steel, aluminum, autos, and goods from Mexico and Canada. This broad trade disruption has put the global economy on edge, with economists from the IMF, OECD, and World Bank warning of serious consequences, including slower growth and higher inflation worldwide. The U.S. itself is expected to suffer significant economic setbacks, with some analysts predicting a recession.

Signs of Thawing Tensions

Despite the tensions, both sides are acknowledging the unsustainable nature of the current situation. U.S. Trade Representative Jamieson Greer and Bessent are set to meet with Chinese officials in Switzerland this week, marking a significant step toward de-escalation. Bessent, however, managed expectations by emphasizing that this is only the first phase of the process.

“My sense is that this will be about de-escalation, not about the big trade deal,” Bessent told Fox News. “We’ve got to de-escalate before we can move forward.”

In recent weeks, both countries have softened their rhetoric. President Trump hinted that he might lower tariffs on China “at some point,” while China has signaled a willingness to consider U.S. proposals to begin trade talks.

China’s Economic Strain

China, for its part, has been standing firm in public, but the economic strain is beginning to show. To boost liquidity and stimulate growth, the People’s Bank of China recently cut the reserve requirement ratio for banks and reduced interest rates on key financial instruments. Wall Street responded positively to these moves, with markets seeing a boost in the days leading up to the talks.

Trade Between the Two Countries Near a Standstill

The economic toll of the trade war is becoming increasingly apparent. April saw a dramatic 60% drop in cargo shipments from China to the U.S., according to logistics firm Flexport. JPMorgan estimates that Chinese imports into the U.S. could drop as much as 80% in the second half of the year.

As Flexport CEO Ryan Petersen pointed out, “It’s only a matter of time before they sell through existing inventory, and then you’ll see shortages. And that’s when you see price hikes.”

At the Port of Los Angeles, expected shipments have already been canceled, with 20% fewer vessels arriving this month compared to last year. “This week, we’re down about 35% compared to the same time last year,” said Gene Seroka, the port’s executive director.

No Deal Yet, But Hope for Progress

Despite the growing economic crisis, both nations remain far from a comprehensive deal. Each side is holding out for major concessions from the other, and the road to normalizing trade relations with China is expected to take years, according to Bessent.

But even without a formal agreement, the face-to-face talks in Switzerland offer a glimmer of hope. With both countries suffering significant self-inflicted damage, the need for de-escalation is becoming undeniable.

Trump himself acknowledged the need for change: “At some point, I’m going to lower [the tariffs] because otherwise you could never do business with them,” he said. “They want to do business very much… their economy is collapsing.”

As the global economy teeters, the outcome of this week’s talks will set the stage for the next chapter in the U.S.-China trade saga—and could be the first step toward a much-needed resolution.

source: CNN – Trump’s team is finally meeting with China. The future of the global economy is riding on its success

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Exports to the U.S. have long been a contentious issue in trade talks between Japan and the U.S., particularly under President Donald Trump’s administration. Negotiators from Japan are currently in Washington, lobbying against the threat of higher tariffs on Japanese goods. Japan, a key U.S. ally and major investor, employs hundreds of thousands of Americans, making it an integral part of the U.S. economy.

In early April, President Trump announced plans to impose a 24% tariff on imports from Japan as part of broader trade measures against multiple countries. However, following panic in the financial markets, Trump placed a partial 90-day hold on the tariff hike while simultaneously raising existing tariffs on Chinese goods to up to 145%.

Despite the temporary delay, Japan still faces significant tariff challenges. A 10% baseline tariff on various imports remains in place, along with a 25% tax on Japanese car imports, auto parts, and steel and aluminum exports. These duties have already taken a toll and present a challenge for Japanese Prime Minister Shigeru Ishiba’s administration.

In response to the tariff tensions, some analysts speculate that Japan might make surprise concessions to ease trade relations. One potential move could involve increasing imports of American rice—an item of cultural significance in Japan. Historically, Japan has protected its rice industry, but rising domestic prices due to a shortage might prompt a shift in policy.

Despite the trade deficit, Japan’s exports saw a 5.9% increase over the past year, driven by strong shipments of computer chips and vehicles. Meanwhile, imports rose by 4.7%, with the weaker yen making imported goods more expensive.

Another factor contributing to the rise in exports is the recent surge in foreign tourism to Japan. Tourist spending counts as an export, further boosting Japan’s economic performance.

For the month of March, Japan recorded a trade surplus of 544 billion yen ($4 billion), with exports climbing nearly 4% from the previous year. This marked the sixth consecutive month of export gains, though the pace of growth slowed compared to February.

Exports to the U.S. rose by 3%, while shipments to other parts of Asia, such as Hong Kong, Taiwan, and South Korea, grew by 5.5%. On the other hand, exports to China fell, reflecting a shift in trade patterns due to ongoing U.S.-China tariff conflicts.

Min Joo Kang, a senior economist at ING, noted that the rerouting of exports within Asia to avoid U.S. tariffs likely contributed to the increased shipments to neighboring countries. This strategy is a part of Japan’s broader efforts to mitigate the impact of the global trade tensions.

As Japan continues to navigate its complex trade relationships with the U.S., the outcome of these negotiations could shape the future of its economic growth and global trade standing.

Source: AP News – Japan reports a $63 billion trade surplus with the US as it talks with Trump on tariffs

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President-elect Donald Trump has pledged sweeping tariff increases on goods from Mexico, Canada, and China, promising dramatic changes to U.S. trade policy on his first day in office. Trump announced these measures via his Truth Social platform on Monday, framing the tariffs as retaliation for issues such as illegal immigration, drug trafficking, and what he describes as “open borders.”

The Proposed Tariffs

Trump’s plan includes:

• Mexico and Canada: A 25% tariff on all imports until illegal immigration and drug trafficking, particularly fentanyl, are addressed.
• China: A 10% increase on existing tariffs until China halts the flow of illegal drugs into the U.S.

“On January 20th, as one of my first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% tariff on ALL products coming into the United States,” Trump wrote. “This tariff will remain in effect until such time as drugs and illegal aliens stop this invasion of our country!”

Trump also criticized China for failing to take effective action against the flow of fentanyl, claiming prior promises to crack down on drug traffickers were not upheld.

Reactions from Affected Nations

China, Mexico, and Canada quickly responded:

• China: Embassy spokesperson Liu Pengyu rejected Trump’s claims, stating that China has cooperated with the U.S. on counter-narcotics efforts. Liu also warned that tariffs could harm both countries, emphasizing the mutual benefits of economic cooperation.
• Canada: Canadian officials highlighted their commitment to border security and emphasized the importance of their shared border for U.S. energy supply. Deputy Prime Minister Chrystia Freeland said Canada would continue discussions with the incoming administration.
• Mexico: While no immediate statement was issued, the Mexican peso dropped 2% against the U.S. dollar following Trump’s announcement.

Economic Implications of the Tariffs

The proposed tariffs could have widespread consequences for the U.S. economy:

• Supply Chain Disruptions: Key industries reliant on goods from neighboring countries and China could face significant cost increases.
• Consumer Impact: Higher tariffs effectively act as a tax on imported goods, raising prices for American consumers. Economists estimate the measures could cost the average U.S. household over $2,600 annually.
• Financial Markets: The announcement led to declines in stock futures and a drop in the value of the Canadian dollar and Mexican peso.

Karl Schamotta, a market strategist at Corpay, warned that the tariffs could add $272 billion annually to tax burdens, increase interest rates, and dampen consumer spending.

U.S. Imports at Risk

The United States relies heavily on imports from its closest trading partners:

• Canada: Supplies oil, vehicles, machinery, plastics, and wood.
• Mexico: Provides cars, car parts, electronics, machinery, and furniture.
• China: Major source of electronics, machinery, toys, furniture, and plastics.

Many of these imports have been exempt from tariffs under the U.S.-Mexico-Canada Agreement (USMCA), which replaced NAFTA during Trump’s first term. It is unclear how Trump’s proposed tariffs would align with the terms of the USMCA.

Historical Context and Challenges

During his first term, Trump imposed tariffs on $380 billion worth of goods, targeting products like steel, aluminum, washing machines, and solar panels. While these measures aimed to boost domestic manufacturing, they also triggered retaliatory tariffs, undermining their effectiveness.

Mainstream economists argue that tariffs are inflationary and detrimental to global trade. Trump, however, views them as a tool to stimulate domestic manufacturing and generate revenue for the U.S. Treasury.

Outlook for Trump’s Tariff Plan

Trump has hinted at even steeper tariffs in a second term, including an across-the-board 10%-20% tariff on all imports and up to 60% on Chinese goods. While Treasury Secretary-designate Scott Bessent supports tariffs if implemented gradually, the risk of retaliatory trade wars remains a concern.

If enacted, these policies could mark a significant shift in U.S. economic strategy, but their long-term impact on industries, consumers, and global relations is uncertain. The incoming administration will need to balance Trump’s aggressive trade agenda with the economic realities facing American households and businesses.

Source

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Economic Concerns: Higher Costs and Inflation

Tariffs, which increase the price of foreign goods, can provide short-term protection for U.S. manufacturers. However, economists caution that they can also contribute to inflation, which may hurt other sectors of the economy.

Gary Schlossberg, a global strategist at Wells Fargo Investment Institute, acknowledged the protective effect of tariffs but noted that the resulting inflation could hurt manufacturers who rely on imported materials. “Depending on where you are in manufacturing, inflation could work against you,” he said.

During his first administration, Trump imposed tariffs on products like solar panels, washing machines, and certain metals. These measures were maintained by President Biden, with additional tariffs on Chinese goods. Now, Trump is proposing even more aggressive tariffs: 60%-100% on Chinese imports and a universal tariff of up to 20% on goods from other countries.

“We’ll lead an American manufacturing boom,” Trump said during a September speech in Georgia, predicting that tariffs would incentivize companies to build within the U.S.

However, these measures come at a cost. The Peterson Institute for International Economics estimates that tariffs could cost a typical American household more than $2,600 annually. According to the National Retail Federation, the tariffs could reduce American consumers’ spending power by $46 billion to $78 billion each year. For instance, a $50 pair of athletic shoes could increase to $64, and a $2,000 mattress set could rise to $2,190.

Impact on Manufacturers and Consumers

While tariffs might offer relief to some manufacturers, the rising costs could be passed on to consumers. For example, Matt Bigelow, president of Vermont Flannel, which sources fabric from Europe, expressed concern about the effect of tariffs on consumer prices, saying that inflation is already a real issue for his company.

Stephen Liquori, CEO of Goodwear USA, a Massachusetts-based apparel manufacturer, acknowledged that tariffs could level the playing field by raising the cost of imported goods. However, he questioned their long-term effectiveness, noting that some products are simply not feasible to produce domestically. “I’m realistic about that. I’m not going to say, ‘Make everything in America,’” he said.

Optimism for Jobs

Despite inflation concerns, some manufacturers are optimistic about the potential job creation that could result from expanded tariffs. Drew Greenblatt, president of Marlin Steel, a wire and sheet metal products manufacturer, believes that tariffs will bring manufacturing jobs back to the U.S. His company, which sources American steel, lost out on contracts due to lower-cost imports. “I’m going to start winning all those jobs,” Greenblatt said, predicting the need to double his staff if tariffs take effect.

A study by the Coalition for a Prosperous America suggests that a universal 10% tariff could create up to 2.8 million jobs. However, a 2020 report by the Brookings Institution found that the job gains in industries like steel were offset by losses in sectors dependent on imports or facing retaliatory tariffs.

Bayard Winthrop, CEO of American Giant, a U.S.-based apparel manufacturer, expressed support for a gradual approach to tariffs. While tariffs could boost his company, he cautioned that a sudden 20% tariff could be harmful to the economy. “The benefit is it will begin to put in place some industrial capability in the U.S. that I think is desperately needed,” Winthrop said.

Strategic Tariffs for National Security

Scott Paul, president of the Alliance for American Manufacturing, advocates for a strategic approach to tariffs, especially on Chinese products. He sees tariffs as an essential policy step to reduce the U.S.’s economic dependence on China, calling it a critical move for national security.

Source

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