The latest trade agreement between the US and China gives both sides time to breathe, but the analysis shows it offers no guarantees. At the same time, it illustrates how consistently the United States is pursuing its bilateral strategy. Most recently, this approach led to an understanding with Switzerland.
Temporary tariff concessions offer limited relief
The trade deal reached by the US and China on 25 and 26 October is fragile. While the agreement provides respite as a tactical ceasefire, it does not represent a strategic turnaround with lasting guarantees. The concessions set out in the agreement do not fundamentally change strategic competition between the US and China. Instead, they should be seen as an opportunity aimed at gaining time to overcome bottlenecks and gradually reduce mutual dependence.
Among key agreements reached, the US is extending the suspension of the 24-per-cent reciprocal tariff until 10 November 2026. The overall tariff rate will drop to 31 per cent. In return, China may withdraw the tariffs of 10 to 15 per cent on agricultural products from the US.
Additionally, the US is waiving the 50 per cent affiliate rule, which aims to close loopholes allowing companies to circumvent export controls by using subsidiaries. China is delaying scheduled export controls on five additional rare earths for one year and expanding purchases of soybeans, livestock, and vegetables from the US. Both countries have agreed to pause reciprocal seaport fees for one year.
Both countries have identified advantages
China’s concessions will prevent further US export controls on so-called critical software — components essential for semiconductor industry production. Trump had threatened this step as retaliation for China’s tightened restrictions on rare earths, which would have resulted in additional bottlenecks hindering China’s pursuit of technological independence – a priority highlighted in the recently drafted 15th Five-Year Plan (2026-2030). China also needs cheaper access to foreign markets due to domestic oversupply.
The US, for its part, has secured an additional year to establish rare earth supply chains outside China. Washington is reportedly already deepening partnerships with countries such as Japan, Malaysia, and Vietnam. Tariffs on other rare earths would significantly affect politically important sectors of the US manufacturing industry, such as defence and automotive.
Although tariff reduction could boost Chinese exports of textiles, toys, and low-margin goods, only a slight upturn is expected. This effect could be partially offset by a subsequent decline in the diversion of production chains via third countries such as Vietnam and India.
The fragile trade truce harbours risks
The suspension of new US restrictions on critical software gives China’s semiconductor industry some breathing room. However, due to the lack of concessions from the US on high-end chips, bottlenecks remain. With regard to rare earths and strategic industries, the US remains structurally dependent, as China reportedly controls almost 90 per cent of global refining. Overall, the long-term stability of the agreement is not credible enough to create incentives for the restructuring of global supply chains.
US agriculture could initially receive a boost from the announced volumes – particularly in soybean production. However, soybean exports remain below historical averages, and China continues to rely on substitute suppliers from Brazil. The loss of market share in China is therefore set to continue, even if the agreement holds up.
Risks lie particularly in areas not addressed in the agreement. Unlike the framework agreements with the EU, Japan, and South Korea, the US-China deal includes no sector-specific tariffs. As a result, China remains exposed to potential tariffs on electronics, pharmaceuticals, and furniture.
As a potential source of leverage, it is also notable that the agreement does not address export restrictions on advanced chips or US military commitments to Taiwan. Additionally, US companies remain vulnerable to Chinese anti-dumping measures on analog chips, as China could impose tariffs of a similar scale to those seen recently in the ruling on EU brandy. Such tariffs could follow at the end of China’s anti-dumping investigation into chips from the US in about a year's time.
Decoupling must factor in dependencies
Overall, the two economies are expected to continue the long-term path of gradual decoupling, while remaining highly interdependent in the immediate future.
Companies must remain vigilant as the fragmentation of value chains continues. Strategic competition between the US and China remains a significant risk to global trade.
emphasizes Junyu Tan, North Asia economist at Coface.
Bilateral strategy also takes hold in Switzerland
In a broader context, the agreement with China marks another milestone on the United States’ path toward undermining multilateral trade systems through bilateral strategies. This was most recently visible in the arrangements on customs issues between the United States and Switzerland – a country that already relies heavily on bilateralism out of pragmatic necessity.
While the impact of the China deal on Switzerland is likely to remain limited, one-to-one negotiations with different partners tend to add uncertainty to the global landscape. It remains unclear to what extent this strategy will actually secure US influence within a newly emerging order.
> Read our full Country Risk assessment and forecasts of China and the USA.
