Kaiser Kuo, Eric Olander, Andrew Polk, and Lizzy Lee on the Geneva Trade Truce, the J-10C Dogfight, and China in Latin America

Lizzy Lee

I think the market can take a moment to breathe. In general, this is terrific news, and I'll admit it beat my expectations. I did write something on April 9th suggesting a deal might come sooner than people expected, but reducing tariffs by 100 percentage points — that was beyond what I anticipated.

Andrew Polk

Definitely a positive development, as Lizzy said. Also far beyond my expectations — I was in the camp that thought this would drag on forever. And to be clear, this isn't done. We're having a temporary reprieve; who knows what the next 90 days holds.

One thing I want to flag: maybe the most important development for our clients is not the reduction in tariffs but the still-unclear reduction in non-tariff trade barriers that China offered — likely including more rare earth shipments to US companies. That seems like a pretty significant concession.

Lizzy Lee

Especially given the repeal of the AI diffusion rule and the global ban on Huawei chips. It's not clear what's going to happen in that space, since a lot of the export bans were tied to semiconductor export controls rather than tariffs per se. We're watching that very closely.

Eric Olander

My first gut feeling when this came out was: what's the point? The whole rationale for the high tariffs was to make manufacturing in China prohibitive for export to the US. At 30% or 40%, that's no longer prohibitive — it just makes it more expensive. Some costs will be absorbed by the supplier side, some by the importer, some by the consumer. What does Trump actually get out of this? If you listen to Steve Bannon, he makes a cogent argument that it's all part of re-centring American manufacturing. But this deal with China will not re-centre American manufacturing.

Lizzy Lee

The problem with tariffs is that if they're not high enough — say 30% or 40% — they'll basically just be passed on to consumers and manufacturers. If you want to use tariffs to reshore supply-chain manufacturing, they have to be high enough to offset China's cost advantage and sustained long enough to give companies real motivation to move production back to the US. China's cost advantage is on the order of 30% to 50%, so anything under 50% just won't cut it. But a sustained 60%, 80%, or 100% tariff would be a major drag on the US economy. Tariffs are in some sense the wrong tool for potentially the right problem.

Andrew Polk

I think that's right. And I'm not a supporter of tariffs generally — I disliked it when the Biden administration put them on too. We have more appropriate tools. But to Eric's point, I don't think there's a clean answer to the question of what Trump gets. Both sides were obviously going to prefer a climb-down that didn't involve an obvious loss of face. This is sort of the outcome one would have hoped for, irrespective of which side you're on. Both sides can declare victory, and neither feels it's been handed a gigantic defeat.

My big question is whether we'll look back on this moment as a turning point in history — the moment when a defiant China stood up, forced the United States to back down, and emerged as a true peer competitor.

Eric Olander

Something big is happening, but we don't yet know the magnitude. There's been a change in the US–China relationship that probably won't go back. Remember: when Biden came in after Trump's first term, he did virtually nothing to reset relations — he kept the tariffs, stepped up pressure in the South China Sea, and deepened alliances. Whoever replaces Trump in 2028 will probably continue what we have now. This is the new normal, and I suspect the relationship gets only more contentious.

One other point: remember the "big juicy chocolate cake" moment — the Mar-a-Lago meeting in Trump's first term, the warm relationship with Xi — and how it inevitably led to disappointment, heartbreak, and animosity. We're at the chocolate-cake moment right now. Give it six to twelve months, and I suspect their agendas will prove too divergent to sustain the goodwill.

Lizzy Lee

I want to offer a slightly more optimistic take. Tariffs created a lot of tension, and this sudden reduction creates more goodwill. We started from a very low-trust environment, and that didn't start with Trump 2016 — we've been in this low-trust environment for a long time. My hope is that this climb-down opens up that space of trust a little more.

There's a real desire from both sides to rebalance. If you saw Scott Bessent speaking in the Middle East, he was directly referencing Ray Dalio's work on rebalancing. Focusing on bilateral trade imbalance is the wrong way to go, but there is a real desire for the US to re-industrialise and a real desire from Beijing to pivot to the domestic economy. The political will is very real. The only path I see is permitting Chinese firms to invest in the US — through joint ventures or with some technology transfer built in. The Chinese side has said they want to bring their own food and eat at your table — they can export their industrial capability to the US and help with re-industrialisation. For the US, this is very much about market access: market for technology, but reversing the roles — China offering technology transfer to the United States.

Eric Olander

From your lips to God's ears. I love the optimism. But find me five people in Washington DC who have trust in China, and find me five people around Xi Jinping who have genuine trust in the US. Both sides have deep, deep distrust. It's going to take a long time for trust to be rebuilt. Ronald Reagan had it right: trust but verify.

Andrew Polk

I will say this: no one running a firm in China with export exposure or import vulnerabilities from the United States is going to get remotely complacent. Once bitten and many times shy — nobody in China is going to let their guard down on this.

To be more constructive: a potentially feasible next step would be for both sides to agree on a clean, narrow whitelist of investment areas considered relatively low in national security priority, and start from there. The current overreach in the name of national security — not just from China but from the United States — is creating a lot of unnecessary tension in the bilateral business relationship. If both sides could publish a negative list clearly stating where firms can and cannot invest, focusing on lower-priority areas first, that would be a genuinely helpful step.

Lizzy Lee

We'll get more clarity in the next two months or so, especially in July when European leaders visit China. The really interesting question is what China will offer to address the EU's concerns over overcapacity — and whether China will actually impose price floors on its exports or consolidate the domestic EV sector, allowing perhaps 80% of its EV firms to go bankrupt. If China can manage that, it would be a concrete trust-building point with the EU. There's actual political momentum behind addressing some of Europe's more substantial concerns.

Andrew Polk

What has fundamentally changed is China's playbook. China is approaching this chapter of the trade war in a far more disciplined way than last time. The mindset and capability — diversifying sources of imports, more import substitution — that's what has fundamentally changed, and China will never go back. It might temporarily buy more US agriculture as part of a trade deal, but as soon as that runs its course, the diversification will continue.

Eric Olander

From Southeast Asia, there is just huge relief. Everybody wants to see this go away and have some type of stability return to the global trading mechanism. It's not there yet, but the anxiety has subsided a little.

Vietnam just started its negotiations this week. There were rumours of a deal to bring tariffs down to around 20%, with Starlink coming into Vietnam as part of the arrangement. Cambodia is starting its negotiations as well. The big question for ASEAN countries is rules of origin and trans-shipment. Everyone is making public gestures to the Americans saying they won't be a backdoor for Chinese goods.

Here's the thing: the State Department will be one of the divisions tasked with monitoring content and ensuring trans-shipment rules are adhered to. And they're cutting the State Department heavily. There's a real open question as to how the United States will actually enforce trans-shipment requirements on Cambodia, Vietnam, Malaysia, and others, where Chinese companies will be very aggressive in circumventing higher tariffs.

Andrew Polk

The current US–China deal actually raises the stakes for Southeast Asian negotiations. If Vietnam has a 25% tariff and China has 30%, Chinese companies operating in Vietnam might start thinking it makes sense to go home. Does that create pressure on those countries?

Eric Olander

I don't think there will be a reverse migration. The outflow of Chinese manufacturing to the global south has been underway for four or five years, accelerating now — driven by a desire to diversify supply chains, be closer to customers, and manage higher labour costs at home. The costs in China today are considerably higher than in Cambodia, Bangladesh, or even Vietnam. What everybody wants is stability, and we're still a long way from that.

One thing that should keep White House folks up at night: the ASEAN-plus-three statement that came out with China, South Korea, and Japan commits them to working more closely together. Every other Tuesday there's a high-level Japanese delegation somewhere in Southeast Asia. The world is reconfiguring around the United States at remarkable speed. There's also much more emphasis on RCEP — the Regional Comprehensive Economic Partnership — and on bilateral free trade agreements. Vietnam has nine FTAs and intends to lean into them. Currently 30% of Vietnamese exports go to the US; I've heard they'd like to bring that below 20% to reduce vulnerability.

Lizzy Lee

Something real is happening on regional integration. The idea is: China has this problem, the US is not a reliable partner — how do we build more structural flexibility? Vietnam has infrastructure advantages, Malaysia has consumer markets and tech, Cambodia has relatively low-cost labour. Why not slash trade barriers within the region and integrate more? ASEAN as a whole would then have more stability against larger external disruptions.

Eric Olander

That's already happening. If you build a car in Thailand, it crosses into Vietnam with virtually no tariff. And companies everywhere — not just in Southeast Asia and China, but multinationals — are permanently recalculating. Their main customer has become unreliable. By survival instinct, they are reducing exposure. These decisions are being made very quickly and are totally changing the calculus of how commerce is done.

Eric Olander

On May 12th there were reports that the J-10Cs performed admirably against Indian Rafales, and there was enormous excitement in Chinese media. I apparently angered the entire Indian subcontinent on LinkedIn. They are absolutely furious with me — I'm a propagandist, I'm paid by China, I'm paid by the CIA.

So: Pakistan said five Indian jets were shot down. This sparked a fury of excitement in China, hailing what they called their DeepSeek moment — Chinese military technology that had never been proven in combat demonstrated itself to be far more capable than anticipated. The Chengdu Aircraft Corporation stock shot up 29% in five days, and if you'd bought it the month before, you were up 50%.

The key argument is about system integration. 81% of Pakistan's military hardware now comes from China. Because it's one ecosystem, the PL-15 missile can communicate with the J-10C, which can communicate with ground stations and airborne early-warning aircraft. India, by contrast, operates Russian equipment, Indian-made equipment, some US equipment, and the French Rafales — making that kind of integration extremely difficult. It's Apple versus Android. The Chinese have one unified hardware-and-software stack; India has a heterogeneous mix. That's the case I made for why this was a DeepSeek moment.

Eric Olander

We have quantities of misinformation that make it very difficult to say definitively. Nobody really knows the exact numbers and India hasn't acknowledged losses. But there is an assessment by a lot of Indian military analysts that the Chinese technology performed better than expected. Remember: India's defence budget is eleven times the size of Pakistan's. And it was apparently India that engaged JD Vance and Marco Rubio for ceasefire talks. The question I kept putting back to people yelling at me was: are you happy with how that played out?

Lizzy Lee

I think Eric is absolutely correct. The J-10 is not even China's most advanced fighter. What really made a difference is how it performed as part of a bigger system — paired with Chinese radar, early-warning aircraft, and long-range missiles. It's a system-to-system comparison, not a tech-to-tech comparison. This is what makes China's innovation model tick.

You see this in DeepSeek, in Huawei — it's about system integration, not cutting-edge technology for its own sake. And it's cost-effective. China's innovation is not about breaking through constraints; it's about working around them. They iterate fast, push hard on commercialisation and deployment, and optimise for "good enough, integrated, and affordable." That is a fundamentally different model of innovation that the world has yet to fully appreciate.

Andrew Polk

China's absorption capacity has increased dramatically. It doesn't matter if you acquire IP if you can't reverse-engineer it and integrate it into your systems. China's capability to absorb foreign technology is now so advanced that measures like export controls become much less effective. It always comes back to the integration piece, and China is clearly getting better at it.

Eric Olander

I just don't know what to make of it, and I don't see it getting better.

Eric Olander

Colombia today signed on to the Belt and Road Initiative. China lost one with Panama but has now gained Colombia. That has to be considered a huge win — and a very big risk for Colombia, because they're going to hear from Marco Rubio and the Americans. You can already imagine the conservative attack ads for Colombia's national elections next year: "We'll get us out of the Belt and Road." China is now going to be an election issue in South America for a number of different governments.

Xi announced $10 billion in export credits at his speech to the CELAC gathering — not a huge number, especially since Latin America and South America are now among the most important trading regions for China. Annual trade hit $515 billion last year, and we're probably going to see that go up to closer to $600 billion this year with all that agricultural buying.

Eric Olander

You sit in a room banging out stories day in and day out. It just gets burned into your brain.

Lizzy Lee

He's absolutely right when it comes to this debate. When Western economists think of consumption, it's straightforward in a Keynesian accounting framework — you need household consumption to grow for sustainable growth. But in China, the constructs of well-being and happiness are much larger than consumption. What are the policy goals, the targets, the things that enter the utility function when policy makers think about this pivot to the domestic economy? It goes beyond consumption.

Maybe a better term to capture this pivot is "pivot to higher quality of life," not "pivot to consumption as a proxy for higher quality of life." The seamless convenience of transportation in Chinese cities, for instance — that's an investment in quality of life, not simply a supply-side measure. The Chinese side needs a new vocabulary to capture what it actually wants. "Investing in infrastructure" doesn't capture it. "Investing in people" is closer.

Andrew Polk

The way I frame it: Chinese leaders see consumption as the end of a process, not the beginning. Western economists look at national income accounting and say you need household consumption to grow. Beijing's ideal plan starts on the supply side — a more productive and innovative economy, companies that make more profit, raise wages, pay more taxes, and then at the end of that process, employees have more money to spend and the state has more money to build out a welfare system, which allows people to save less. They want more consumption, but through a process focused on innovation and high-quality goods both domestically and for export. They want consumption to be sustainable, and to make it sustainable, all those other things have to happen first.

Eric Olander

I'm about 60% through Kevin Rudd's book on Xi Jinping — it's not an easy read, very much like a PhD dissertation, but it's an important one right now. He gets into the minutiae of how Xi sees the world and how he's been restructuring the ideological and policy base for this moment we're in today. Paired with Richard McGregor's The Party, those are two books that go together very well. Also: this week's interview on The Daily with Keith Bradsher from the New York Times — excellent, with a few quibbles.

Lizzy Lee

Kevin is one of the deepest thinkers when it comes to party language, and it's incredibly important to understand not just how the party talks to the world but how it talks to itself. One small gem I've unearthed: one of the top three Chinese officials at the Geneva talks — Li An — was something of a folk music celebrity in the 1990s and wrote a song called "Waiting for Someone Is Like Drinking Alcohol." What I find fascinating is an old interview in which he talked about his student days, saying: "We were so idealistic. The campus was not nearly as commercial or frantic as it is now. We didn't feel the pressure of finding a job. We were single-minded in our pursuit of classical liberal learning. Each day we moved between our classroom, the gym, the library, and the dorm — just those four places." Campus folk rock meets trade negotiator.

Andrew Polk

My plug is a piece by my business partner and colleague Kendra Schaefer on our website, triviumchina.com. China's Cyberspace Administration has a registration system for any AI product going to market, and Kendra pulled that data and did analysis on it. Some fascinating preliminary findings: there are almost 4,000 registered generative AI or algorithmic tools operating in China, with 250 to 300 being approved every month. They're mostly focused on B2B and foundational technologies. What I love about the piece is it highlights that there are publicly available data sets maintained by the Chinese state that you can mine for all kinds of interesting information on what's happening — and this is a great example of that.