Diplomatic Breakdown: China Responds to U.S. Allegations
On June 2, 2025, China’s Ministry of Commerce issued a strong rebuttal to U.S. President Donald Trump’s recent accusations that China had violated a trade truce established in May. The agreement, reached during talks in Geneva, aimed to de-escalate the trade war by reducing tariffs from 145% to 30% on U.S. imports and from 125% to 10% on Chinese goods. President Trump had claimed that China “totally violated” the agreement, citing delays in approving export licenses for critical minerals.
In response, China’s commerce ministry stated that the U.S. had “seriously undermined” the agreement by imposing new export restrictions on AI chips, halting sales of chip design software, and revoking visas for Chinese students. The ministry emphasized that these actions “seriously violate the consensus reached” and vowed to take “resolute and forceful measures” to protect China’s interests.
Economic Implications: Market Reactions
The renewed tensions between the U.S. and China have had immediate effects on global financial markets. U.S. stock indices experienced declines, with the Dow Jones dropping 166 points (0.4%), the S&P 500 falling 0.3%, and the Nasdaq decreasing 0.1%. Similarly, Asian markets were affected, with the Nikkei 225 falling 1.3% and the Hang Seng Index declining 0.6%. Investors are expressing concerns over the potential for a full-scale trade war between the world’s two largest economies.
Diplomatic Channels: Prospects for Resolution
Despite the escalating rhetoric, both nations have indicated a willingness to engage in dialogue. U.S. Treasury Secretary Scott Bessent expressed confidence that President Trump and Chinese President Xi Jinping would have a conversation soon to address the trade issues. However, Chinese officials have suggested that lower-level negotiations should precede direct talks between the leaders.
Conclusion: Fragility of the Trade Truce
The recent exchange of accusations underscores the fragility of the trade truce between the U.S. and China. While both sides have expressed intentions to resolve their differences, the implementation of the Geneva agreement remains contentious. The coming days will be crucial in determining whether diplomatic efforts can prevent a return to full-scale trade hostilities.
