US-China Tariff Tensions Reignite as Trump Walks Back Soften Stance

The IMF also lowered China’s 2025 growth forecast, albeit modestly, by 0.6 percentage points to 4%, cushioned by Beijing’s stimulus support measures.

IMF Chief Economist Pierre-Olivier Gourinchas stated that growth prospects could improve rapidly if trade tensions eased and new agreements were reached. He emphasized the importance of addressing internal imbalances and increasing domestic demand in China to support global output.

Retail Sector Warnings and Recession Fears Prompt Policy Shift

The IMF also raised its estimate of a 2025 US recession to 40%, up from 27% in October. However, it noted that Beijing’s fiscal stimulus was helping counter the negative impact of trade tensions on China’s economy.

Earlier this week, Trump met with the CEOs from Home Depot, Lowe’s, Target, and Walmart. The CEOs warned Trump of empty shelves looming in the months ahead. With private consumption accounting for over 60% of US GDP, empty shelves could hit the US economy hard. Supply-demand imbalances may also push inflation above the IMF’s latest 3% forecast.

In political circles, Trump’s softened stance is also seen as an effort to shield US farmers—a core segment of his base. Fox Business Senior Correspondent Charles Gasparino noted that the tariffs were hurting agricultural exports to China, undermining Trump’s support in rural America. However, sources indicated that a deal remains distant and that Chinese willingness to compromise is still uncertain.

Economists argue that China’s entrenched role in global supply chains potentially limits Washington’s leverage. Natixis Asia Pacific Chief Economist Alicia Garcia commented: