The US appears to be preparing a partial retreat in its trade war with China, but investors shouldn’t mistake the move for a full-scale thaw in relations between the world’s two largest economies.
That’s the message from Jefferies this week, whose analysts believe talk of reduced tariffs is more tactical than conciliatory.
Markets rallied this week following comments from Treasury Secretary Scott Bessent and President Donald Trump suggesting that the US may reduce tariffs on Chinese imports—particularly on products deemed non-strategic. But Jefferies analysts argue that this shift is more about market optics and long-term positioning than a genuine de-escalation.
“This is perceived as an effort by the US to de-escalate the tension with China,” the analysts wrote in a recent note.
“In China, it is perceived (based on media reports) as a sign that Trump’s team has given up on its high-pressure tariff tactics. However, we believe it is premature to be structurally bullish.”
Reshoring, revenue, rivalry
Jefferies says Trump’s tariff strategy is aimed at reshoring key manufacturing, boosting government revenue, and shifting global supply chains away from China to strengthen the US’s long-term strategic position.
Even if the US were to halve its current reciprocal tariff on Chinese goods—now at 145%—Jefferies believes it would do little to bring Beijing to the negotiating table. “Even halving the tariff would unlikely prompt China to talk,” the analysts noted, “but China could also relax its counter tariffs to help lower the temperature.”
Bessent’s suggestion that tariffs could drop significantly for products that pose no national security risk points to a more targeted, sector-by-sector approach. “Lower tariffs on non-strategic imports from China supports our view on sectorial tariffs,” the report said. “If one key objective is to reshore manufacturing of strategic products/tech, high tariffs would be used to incentivize such migration. For non-strategic products, they could be subject to lower tariffs so that the US could benefit from low-cost production elsewhere.”
The idea of selectively applying tariffs could signal what Jefferies calls a “phased-in sectorial tariff” approach, particularly for consumer electronics and servers, depending on their semiconductor and display component content.
Still, Jefferies warns that lower import duties shouldn’t be interpreted as a sign of easing tensions in the broader US-China tech rivalry.
Jefferies notes the US still has three major pressure points on China: an investment ban, ADR delistings, and tech restrictions.
While easing tariffs could reduce the first two risks, tech controls tied to national security are likely to stay.
“Trump’s team would unlikely easily give up,” the analysts noted, “but would frequently adjust their strategies depending on progress in negotiations with other countries and financial market reactions.”