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US stocks (^GSPC, ^IXIC, ^DJI) continued to climb after news that the US and China agreed to pause tariffs for 90 days. Zongyuan Zoe Liu, a fellow at the Council on Foreign Relations, joins Market Domination with Julie Hyman and Josh Lipton to explain why this pause may ultimately benefit China more than the US.
To watch more expert insights and analysis on the latest market action, check out more Market Domination here.
Stocks are continue to climb as the US and China agree to slash those tariffs for at least 90 days. But as US markets celebrate our next guest says the agreement could be a bigger win for China. Joining us now, Zhang Gwen Lou, fellow at the Council on Foreign Relations. Zoe, thank you so much for being here. So, um, a bigger win for China. Why is that?
Julie, thank you very much for having me. You know, I think this is in fact a bigger, a bigger win for China. Not not just because basically the Trump administration over the weekend has nearly undone the liberation day tariff uh, over China. But then on top of that, it seems that the whole strategy of building allies uh, to isolate China with regards to building a huge tariff wall to separate us versus China. That strategy seems to not be working because China, uh, our tariff on China, the Trump administration's tariff on China now is only 10% higher.
So so what comes next? You think as Besson was talking to press this morning and suggesting he'd be meeting with Chinese counterparts again in the next few weeks, kind of iron out a bigger agreement. What what do you think the bigger agreement looks like?
Josh, you are right to point out that uh, Secretary Besson mentioned uh, the the mechanism and in fact in in writing in the agreement, they mentioned about the mechanism for continued conversation. Now here is the trick, right? Although some uh, Trump administration officials frame this as if we have reached a, we have reached a breakthrough, we have reached a deal, but you do not see the Chinese call it this way. The Chinese framed this as, we reached a, we we made progress in resolving differences, but the Chinese never said that this is a major breakthrough. So going forward we probably will see uh, continued conversation between the two sides. And now we have 90 days for both sides to figure out what they want and what they are willing to compromise. But ultimately, so far we still see an asymmetry in terms of governance style. On the one hand, President Trump has featured prominently in media. And then on the other hand, uh, President Xi Jinping has never given any comment about a tariff yet.
So Zoe, I can't help but wondering what the point of this exercise was. Now, we know it's not done yet, so we don't know what the two sides will agree upon. We don't know what the US will get out of it, but the US initiated this. So what does a best case scenario look like, and does it put the US in a better place than it was on January 1st, say?
I'm afraid, Julie, that I'm not as optimistic because, you know, it is relatively easy to undo the self-inflicted tariff rates, but it is very hard to undo the damage that has done to America's credibility and perhaps to a certain extent the role of the US dollar, not just in the short term, but also in the long run. Now, the best case scenario for American consumers, perhaps would be we return to the pre-liberation day tariff scenario. Um, but that is going to take a long time. And then, uh, the better scenario, the best case scenario for American manufacturers is that through a period of time, and this is going to be a long period of time, that American suppliers, American manufacturers, American industries, where are able to build an alternative supply chain relatively independent of China. But this is going to take forever, and we simply cannot bring all the manufacturing jobs back to America through tariffs.