analysisCan China and America resolve their trade differences in Geneva?By chief business correspondent Ian VerrenderTopic:Tariffs1h ago1 hours agoThu 8 May 2025 at 6:40amDiscussions between Donald Trump and Xi Jinping on US tariffs might be a step closer to happening. (AP: Susan Walsh)abc.net.au/news/china-us-trade-war-tariff-negotiations-switzerland/105269594Link copiedShareShare articleWhat a coincidence!As luck would have it, US Treasury Secretary Scott Bessent already had a trip to Geneva planned this weekend.And guess who else will be in the Swiss capital? The Peoples Republic of China's Vice-Premier He Lifeng, the country's top economic official.For more than a month, the White House has been urging President Xi Jinping to "pick up the phone", indicating that, while the US was open to negotiations over its brutal tariff policy, it wasn't willing to make the first move.As it turned out, neither was Beijing.But, in an incredible twist of fate, Bessent told Fox News he'd planned to be in Switzerland to negotiate with the Swiss.US Treasury Secretary Scott Bessent will be in Geneva this weekend. (ABC News: Bradley McLennan)Given Geneva is home of the World Trade Organisation, which has been made increasingly irrelevant by America's global trade upheaval, it wasn't an altogether unlikely bit of serendipity."Turns out the Chinese team is travelling through Europe, and they will be in Switzerland also. So, we will meet on Saturday and Sunday."News of the meeting has buoyed financial markets following a fortnight of growing optimism that the Trump administration's Liberation Day tariff imposition on April 2 was more negotiating tactic than permanent policy.Albanese's big challenge is straddling the US-China fencePhoto shows Donald Trump frowns as he looks off camera while Xi Jinping stands behind him.America has decided to sever its trading relationship with China — a strategy that ultimately will come at enormous cost. And Australia, more than any other nation, will be caught smack in the middle.Both sides have been adamant the trade war will hurt the other more. And neither was willing to blink on being the first to open negotiations.With that uncomfortable first step out of the way, they can now begin preliminary talks.But it would be naive to think the US and China will be singing from the same Swiss song sheet by Sunday night, let alone having the hills come alive.Even Bessent is winding back expectations, noting the meeting most probably will merely be to "agree what we're going to talk about."Peace in our time?The envoys may be talking but, back on the battlefield, both sides are digging trenches.For even if US President Donald Trump cuts his China tariffs to 50 per cent, as has been floated, the impact on two-way trade between the countries will be profound.Bessent has admitted that America's 145 per cent tariff impost on China — and Beijing's retaliatory 125 per cent — essentially is a trade embargo. While a significant reduction, 50 per cent isn't that much better.On Wednesday, the People's Bank of China cut interest rates and allowed Chinese banks to reduce the amount of cash they need to hold in reserve.Both moves are designed to spur domestic lending, improve liquidity and weaken the renminbi, thereby boosting China's export competitiveness.In contrast, later that night US Federal Reserve chair Jerome Powell kept rates on hold, a move almost certain to enrage the US president who has cast aside conventions of central bank independence as he urges rate cuts.Powell's reticence, however, speaks volumes about the different potential impacts on both countries.Donald Trump appointed Jerome Powell as chair of the Federal Reserve during his first term as president.Beijing's money mandarins clearly fear an assault on growth as the biggest threat to China.The US Fed is also worried about growth. But it's equally concerned about inflation.And that is a major complication for America. Stagflation — the dreaded combination of stagnation and inflation — would inflict a serious blow upon America's economy and nobble the central bank.If it takes steps to solve one, it inflames the other.Cutting rates may improve growth but it will stoke inflation. Raising rates to tame inflation will tank the economy.The only option for Powell on Wednesday was to hold fire until the smoke begins to clear."It's not a situation where we can be pre-emptive because we actually don't know what the right responses to the data will be until we see more data," he said in the post-meeting press conference.Who's on second?America's economy contracted in the first quarter after imports surged as firms scrambled to secure supplies before they had to pay the tariffs.If ever there was any doubt, it was a tangible piece of evidence that Americans will pay for the trade war through higher consumer prices.Since then, trade flow from China to the US has begun to dry up. Shipping volumes from Chinese ports to California have plunged 35 per cent but consumers have yet to feel the impact as American firms run down their inventories.Once that happens, goods and components shortages are likely to push prices even higher while unemployment rises as consumption falls. That is almost certain to depress growth for a second quarter, the definition of a recession.Trump dismisses 'fake' approval rating as Americans voice tariff fearsPhoto shows Donald Trump smiles as a crowd holds supportive signs behind him.Donald Trump has used a campaign-style public rally to rage against "fake polls" that show his approval ratings falling as he chalks up 100 days back in office.China, meanwhile, isn't approaching this onslaught from a position of strength. A five-year property slump has hit consumers, investors and lenders as deflation has gripped the economy and unemployment soared.Factory output and services already have begun to contract as the tariffs have started to bite. Hence the early action on interest rate cuts.China does have one crucial advantage over the US in one major area. While it exports value-added consumer and industrial goods to America — which the US will find difficult to source at scale elsewhere — China imports mostly agricultural products and raw materials from the US.That delivers it greater flexibility in finding alternative sources. And that will limit any inflationary impact on its economy.Mixed messagingAhead of the meetings this weekend, Scott Bessent expressed confidence that while the Geneva talks were unlikely to result in a breakthrough, they would at least help "de-escalate" tensions.He's also previously made it clear that America does not want to "decouple" from China.Unfortunately, just as he was uttering these comments, the US president ruled out decreasing the 145 per cent tariffs, which are well in excess of the 60 per cent impost he promised during his election campaign.That, no doubt, will put a dampener on negotiations.Beijing, meanwhile, has made it clear that it will not capitulate and will not come to a resolution by force.Given their entrenched positions, it seems improbable there will be any kind of resolution in the immediate future.That isn't what global stock markets are anticipating.Rather than fearing Trump's unpredictable nature, they're now beginning to count on it, hoping he'll abandon or at least wind back his resolve to isolate the US and China.Posted 1h ago1 hours agoThu 8 May 2025 at 6:40amShare optionsCopy linkFacebookX (formerly Twitter)Top StoriesSecond minister booted from cabinet as PM prepares reshuffleLIVEPhoto shows Ed Husic wearing a blue suit sitting in an office.More women in Labor than ever but top jobs still going to menBAnalysis by Brett WorthingtonPhoto shows Anika Wells Amanda Rishworth Katie Gallagher Anne AlyGreens leader Adam Bandt concedes seat, ending 15 years in parliamentTopic:ElectionsPhoto shows Adam Bandt press gallery doorstopHow one mother's grief and love captured hearts across AustraliaCAnalysis by Cason HoPhoto shows A woman sits in front of a microphone on a dimly lit stage with an emotional expression.'Wish we did better': The timeline of confusion during Westfield Bondi Junction attackTopic:CrimePhoto shows Paramedics stand with stretches near vehicles on a road.Related storiesTrump has threatened a tariff on movies made outside the US. 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