Introduction
Tensions between the U.S. and China are flaring once more as Beijing accuses the Trump administration of violating the May 12 tariff truce, reigniting fears of a renewed U.S.-China trade war. Aa
In a sharp statement issued on June 2, China claimed the U.S. broke the temporary agreement by imposing new AI chip trade export controls, restricting semiconductor design software sales, and threatening to cancel Chinese student visas.
The latest escalation raises serious concerns for global trade stability, technology supply chains, and the fragile diplomatic balance between the world’s two largest economies.
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Five Key Points to Know
May 12 Tariff Truce: Both sides agreed to a 90-day pause on escalating tariffs, reducing U.S. tariffs on Chinese goods from 145% to 30%, and China’s tariffs on U.S. imports from 125% to 10%.
China’s Accusations: Beijing claims the U.S. broke the deal by enforcing AI chip export controls and halting sales of chip design software to China.
Student Visa Threat: The U.S. announced plans to revoke visas of Chinese students, a move China says undermines trust and harms educational ties.
Market Reaction: Wall Street slipped on renewed fears of a trade war, with the S&P 500 dropping 0.2% and the Dow Jones falling 0.4%.
Uncertain Outlook: Experts warn that unresolved issues and mixed U.S. policies threaten a broader breakdown in trade relations, impacting global supply chains and economic growth.
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What Is the May 12 Tariff Truce?
On May 12, U.S. President Donald Trump and Chinese President Xi Jinping agreed to a 90-day ceasefire on tariff hikes. This pause eased tariffs that had been ramped up earlier in 2025, which had severely disrupted global trade.
| Country | Previous Tariff Rate | Tariff Rate After May 12 Truce |
|---|---|---|
| U.S. on China | 145% | 30% |
| China on U.S. | 125% | 10% |
The goal was to create breathing space for negotiations toward a more permanent trade deal. While this lowered tariff rates substantially, they remain well above pre-trade war levels.
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China Alleges U.S. Violations
China’s Ministry of Commerce issued a strong statement on June 2. It accused the U.S. of “seriously undermining” the Geneva trade talks consensus by:
- Issuing AI chip export control guidelines.
- Blocking the sale of advanced chip design software.
- Threatening to revoke visas of Chinese students studying in the U.S.
These actions, China said, violate the spirit of the May 12 truce and damage China’s “legitimate rights and interests.”
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Why the Student Visa Issue Matters
The U.S. hosts over 275,000 Chinese students, many in science and technology fields critical to innovation. Last week, the Trump administration announced it would start revoking visas for Chinese students, citing national security risks.
China condemned the move, calling it a breach of trust that jeopardizes academic cooperation and goodwill between the two nations.
Market and Expert Reactions
The renewed tensions rattled markets. On June 2:
- S&P 500 fell 10 points (-0.2%) to 5,901.
- Dow Jones Industrial Average dropped 0.4%.
- Nasdaq Composite slipped 0.1%.
Investors fear the trade war could escalate again, damaging corporate profits and global supply chains.
Arthur Kroeber, China analyst at Gavekal Research, said U.S. policy seems divided: “It is unclear whether trade policy is driven by President Trump, trade negotiators, or national security teams.” He called the trade strategy “muddled” and driven by a “display of raw power” rather than clear objectives.
Carl Weinberg, chief economist at High Frequency Economics, warned that if tariffs spike again, global demand for industrial commodities could “plummet,” and complex supply chains would “shut down,” impacting economic growth worldwide.
What Lies Ahead?
The 90-day truce expires in August 2025. Both countries face pressure to protect industries and maintain growth.
The risk remains that new tariffs, export controls, and diplomatic clashes could further destabilize trade relations.
But until then, uncertainty dominates. Businesses, investors, and consumers should prepare for volatility as these economic giants navigate a tricky path between cooperation and conflict.
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