U.S., China move closer to trade agreement amid economic strain

Officials from both nations say they are actively working to finalize the details of a new trade agreement.

(CNN)- A potential breakthrough may be on the horizon in the long-running trade tensions between the United States and China. Officials from both nations say they are actively working to finalize the details of a new trade agreement — one that could ease a conflict that’s weighed heavily on both economies.

Kenneth Rogoff, former chief economist at the International Monetary Fund, underscored the gravity of the moment, saying, “A tremendous amount is at stake for the U.S. and the global economy.” Leading the American side of the negotiations are Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer. According to Greer, the talks hold promise for de-escalating the trade war — a conflict inflamed by President Donald Trump’s recent 145% tariff hike on many Chinese imports and retaliatory measures from Beijing.

The economic repercussions have already begun to ripple across sectors. Goldman Sachs now projects that a key measure of inflation will effectively double by the end of the year. The National Retail Federation is forecasting a sharp 20% year-over-year drop in U.S. imports for the second half of 2025.

Josh Lipsky, Chair of International Economics at the Atlantic Council, paints a dire picture: “We have, right now, no ships leaving China for the West Coast. That’s the first time we’ve seen that since the COVID pandemic. We are hearing retailers talk about empty store shelves within weeks.”

While China’s representatives have confirmed the establishment of a “trade consultation mechanism,” experts caution against overly optimistic expectations. Lipsky notes, “It’s good news that there’s dialogue… but we need to temper our expectations slightly.”

 Analysts emphasize that the fine print of trade agreements can take months — even years — to finalize. Beyond that, implementation adds an additional layer of complexity.

As Lipsky puts it, “The global economy is not a light switch. You can’t just turn off and on the U.S.-China economic relationship and then expect there’s not going to be some short circuiting.”