On Saturday (May 10th), high-level teams from China and the United States will hold trade negotiations, attracting global attention. Despite the Chinese Communist Party (CCP) publicly stating that they will not back down in the trade war, information from insiders revealed by Reuters has shed light on the factors that have led the CCP to the negotiation table.
After U.S. President Trump announced global tariffs on April 2nd, leaders from various countries reached out to Trump seeking trade negotiations, except for Beijing. China chose to confront and declared that they would not retreat, urging other countries to resist alongside them. On April 9th, Trump announced a 90-day suspension of equivalent tariffs on countries other than China to allow time for these countries to reach trade agreements with the U.S. To retaliate against the CCP’s actions, Trump eventually raised tariffs on Chinese goods to 145%.
According to Reuters, three officials familiar with Beijing’s thinking revealed that as China’s trading partners began negotiations with the U.S., CCP officials are increasingly concerned in private about the impact of tariffs on the economy and the risk of isolation.
These officials told Reuters that the above factors, coupled with reduced contact from the U.S. and softened rhetoric from Trump, prompted Beijing to send Vice Premier He Lifeng to hold talks with U.S. Treasury Secretary Bessent in Switzerland on Saturday.
Three individuals familiar with the CCP’s government thinking told Reuters that one of the major reasons Beijing made concessions in the standoff was internal signals indicating that Chinese businesses are struggling to avoid bankruptcy, impacted by tariffs and finding it challenging to seek alternative markets to the U.S.
An official mentioned industries directly affected by U.S. tariffs include furniture manufacturers, toy makers, and textiles.
U.S. diplomats in China have been closely monitoring factories closures, strikes, and unemployment in the southern industrial center.
Many analysts have lowered their predictions for China’s economic growth in 2025. Nomura warned that the trade war could lead to up to 16 million job losses in China.
One official mentioned that Chinese companies are finding it hard to find alternative markets to the U.S. because developing countries cannot purchase as many goods. For many businesses, this poses a survival threat that needs to be addressed within days or weeks.
In addition to the economic impact, two officials familiar with CCP’s thinking expressed concerns about being excluded from negotiations as China’s main trading partners, such as Vietnam, India, and Japan, have already started trade talks with the U.S.
Due to the instability in U.S.-China diplomatic relations, re-engagement has become complicated. Two officials stated that Beijing particularly found a letter regarding fentanyl sent by the U.S. to Chinese agencies at the end of April as “arrogant and disrespectful.” There are disagreements about which officials should participate in the talks, further hindering negotiation arrangements.
According to an informed official, following Trump’s announcement of tariffs on April 2nd, Chinese Minister of Commerce Wang Wentao quietly contacted U.S. Commerce Secretary Lutnick, but was rejected due to insufficient rank.
The top leaders of the U.S. and China handle diplomatic matters differently. Trump chose to personally engage in direct trade negotiations with leaders of countries like Canada and Mexico and has been pushing for a direct meeting with CCP leader Xi Jinping. However, based on public statements from both sides, China rejected this idea, believing it does not align with Chinese tradition, which requires addressing detailed issues before leaders sign any agreements.
A source said, for China, another significant factor was Trump publicly criticizing Ukrainian President Zelensky during a meeting in February. Any hostile interactions between U.S. and Chinese leaders would embarrass Xi Jinping, which is unacceptable for the CCP leader.
As both China and the U.S. have recently indicated conciliatory messages, Xi Jinping decided to have his trusted aide He Lifeng hold talks with the U.S. This move aims to satisfy Washington’s demand for substantive talks with a senior official who can directly contact Xi, while avoiding potential embarrassment for Xi.
Regarding the choice of meeting place, the Swiss Foreign Ministry stated, “Switzerland expressed its willingness to host a meeting between the U.S. and China in Geneva during recent contacts with authorities in Washington and Beijing.”
Scott Kennedy, a China business expert at the Center for Strategic and International Studies (CSIS), stated, “I believe both sides are striving for a balance, aiming to appear tough while not wanting to take responsibility for global economic decline.”
Kennedy mentioned that in recent weeks, there has been increased contact between Chinese institutions, the Beijing Embassy in Washington, and the Trump administration. At the IMF and World Bank meetings held in late April, there were some face-to-face interactions between China and the U.S., including exchanges with U.S. Treasury Secretary Bessent, laying the groundwork for the talks in Switzerland.
On Saturday, U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer will hold trade negotiations with the top Chinese economic official, Vice Premier He Lifeng, in Switzerland.
This could be the first step to resolve the trade disputes between the two countries. Prior to this, tensions have escalated due to the tariff standoff, with the U.S. eventually imposing 145% tariffs on Chinese goods and China imposing 125% tariffs on U.S. goods, leading to turmoil in the financial markets.
Reuters reported that the turmoil leading up to the talks in Switzerland highlights the deep-seated mistrust and differing negotiation styles between the Trump team and China, which may result in protracted and challenging discussions.
According to a source, the CCP does not have high expectations for the negotiations in Switzerland. The CCP believes that after weeks of conflicting messages from Trump and other senior U.S. officials, this round of talks will mainly serve to understand U.S. demands and red lines.
An official mentioned that China may follow its Asian neighbors in purchasing more U.S. liquefied natural gas. The negotiations may also involve purchasing agricultural products, similar to the “Phase One” agreement reached between the U.S. and China during Trump’s first term. However, sources also indicated that fentanyl will be a topic of discussion at the Geneva talks.
After taking office in January, Trump imposed additional tariffs on China twice for exporting fentanyl to the U.S., totaling a 20% increase.