By mid-2025, what had begun as a fierce and escalating tariff war between the United States and China took a surprising turn. After months of tit-for-tat tariff hikes that rattled global markets — with rates reaching a staggering 245% on some imports — the two economic giants appeared to soften their stance.
President Trump, speaking from the White House in April, hinted at a significant shift. “We are going to make a very good deal with China,” he said, signaling a new willingness to negotiate. Chinese officials, for their part, responded with cautious optimism, expressing interest in talks, provided certain conditions were met. Behind closed doors, high-level negotiations took root. Within weeks, tariffs on both sides began to stabilize: the U.S. held its base rate at 10% while China capped its retaliatory tariffs at 125%.
The breakthrough came in late June when Treasury Secretary Scott Bessent announced that the U.S. and China had reached a “framework understanding” that would set the groundwork for coordinated trade strategies, particularly in advanced manufacturing, pharmaceuticals, and AI technologies. The phrase that leaked from the closed-door meetings sent shockwaves through the global trade community: bilateral trade cartel.
The United States and China — fierce rivals only months prior — now stood poised to jointly manage trade flows of key goods and materials, from semiconductors to critical rare earths. While the agreement was hailed in Washington and Beijing as a triumph of diplomacy, the implications for the rest of the world were far from benign.
Small and emerging economies, already struggling to navigate the volatility of the tariff war, now faced a new challenge. With the world’s two largest economies controlling supply chains and setting de facto global prices, countries in Southeast Asia, Latin America, and Africa found themselves squeezed out. Nations like Vietnam, Brazil, and Kenya saw their exports undercut or outright blocked by shifting US-China policy preferences. Local industries buckled under the economic pressure, unable to compete with the coordinated might of the superpowers.
Even long-time allies of the U.S. like Japan and the EU voiced concern. Japanese Finance Minister Katsunobu Kato warned of “structural imbalance” in the global economy, while EU trade ministers called the deal “an affront to fair multilateral trade.”
Perhaps the most consequential fallout came from Russia. Viewing the US-China alignment as a direct threat to its influence in Eurasia, the Kremlin responded with a barrage of economic measures. State-controlled firms redirected energy exports away from China, while Russia sought tighter trade and defense ties with countries like Iran, North Korea, and Belarus. Diplomatic frictions mounted, culminating in the suspension of several joint projects between China and Russia.
Inside the White House, President Trump remained bullish. He claimed victory not just over China but over the “unfair global trade system.” Meanwhile, China’s leadership, recognizing the strategic value of U.S. cooperation amid its own economic challenges, leaned into the cartel model — at least for now.
Yet the world watched nervously. The US-China détente might have ended one trade war, but it sparked a new era of economic polarization, one that redrew alliances, shattered norms, and left smaller nations fighting to survive in the shadow of giants.
All names of people and organizations appearing in this story are pseudonyms
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