If the global economy were a chessboard, US-China trade relations would undoubtedly represent the pivotal move affecting the entire game. After several turbulent years, signs now suggest this critical relationship may be approaching a turning point. Recent comments from US Treasury Secretary Scott Bassett indicate a new possibility emerging in what some call "Trump 2.0" — the potential for further reductions in tariffs on Chinese goods.
Bassett's Positive Signals Suggest Trade "Rebalancing" Ahead
In a recent interview with Fox Business, Treasury Secretary Bassett struck a notably conciliatory tone, stating that China had "fulfilled all negotiated commitments to date" and emphasizing the Trump administration's desire to work toward "rebalancing" trade relations. Market analysts interpreted these remarks as a positive signal that the bilateral trade relationship may shift from confrontation toward constructive dialogue.
As the key official overseeing tariff negotiations, Bassett's statements carry significant weight in stabilizing market expectations during a period of heightened trade uncertainty. This diplomatic overture appears designed to rebuild mutual trust, with US acknowledgment of China's compliance regarding rare earth export controls and increased agricultural purchases helping reduce trade tensions. Such developments could pave the way for broader discussions on technology, energy, and global supply chain stability — potentially reducing the additional costs businesses face when navigating tariff regimes.
From Tentative Talks to Substantive Engagement
The current diplomatic thaw follows months of concerted efforts to improve economic relations:
- Early 2025: During the political transition period, both nations agreed to maintain communication channels to stabilize economic relations and prevent further deterioration.
- May 2025: High-level trade talks in Geneva produced a joint statement where the US committed to eliminating 91% of tariffs imposed under April 2025 executive orders, while adjusting the remaining 34% of "reciprocal tariffs" — a significant concession establishing groundwork for future negotiations.
- June 2025: The inaugural meeting of the US-China trade consultation mechanism in London yielded substantive progress on resolving mutual concerns, marking a new phase of practical problem-solving through dialogue.
Market analysts now estimate a 70-80% probability of additional tariff reductions in 2026, with expected cuts ranging between 5-10%. This optimism reflects growing confidence in the relationship's trajectory.
The "Rebalancing" Imperative: America's Core Objective
Despite warming relations, trade "rebalancing" remains central to US interests — particularly reducing America's trade deficit with China. Current data shows notable progress toward this goal, with the January-September 2025 goods trade deficit declining 25.2% year-over-year to $175.38 billion. The September 2025 monthly deficit plummeted 51.7% compared to September 2024, falling from $34.15 billion to $16.5 billion.
Potential Tariff Reductions: Modest Steps With Possible Conditions
While further tariff reductions appear likely, analysts caution that cuts may be incremental and potentially tied to Chinese commitments in other areas like intellectual property protection or market access. Fiscal considerations also loom large — with over $200 billion in new tariff revenue collected since early 2025 (totaling approximately $400 billion), the Trump administration views these funds as important for debt repayment and taxpayer rebates, suggesting a measured approach to additional reductions.
The Path Forward: Cooperation Over Confrontation
The healthier development of US-China economic relations requires reciprocal efforts. China's cooperative model emphasizing transparency, mutual benefit, and long-term capacity building contrasts sharply with zero-sum approaches. With many American companies now considering China their second-largest revenue source, stable bilateral trade serves both nations' interests. As the list of contentious issues shrinks and cooperative opportunities expand, the foundation strengthens for more sustainable economic relations.
Market responses have been decidedly positive, with renewed business confidence and favorable equity movements reflecting optimism that reduced trade tensions will lower global economic uncertainty. These developments underscore how cooperative solutions ultimately benefit both nations — and the wider world economy.