US-China Trade Truce in Turmoil: Accusations Fly as Both Sides Claim Agreement Violations

A Trade Truce Unravels: What Sparked the Latest US-China Clash?

Did you see the headlines this week? Just a few weeks after the US and China struck a much-needed deal to pause their tariff war, both sides are now hurling accusations of betrayal. On June 2, President Trump declared that China had totally violated the Geneva trade truce, which had briefly calmed markets by slashing tariffs and promising a 90-day negotiation window. In response, China’s Ministry of Commerce fired back, insisting it’s the US that broke the agreement first by imposing new restrictions and export controls. The mood? Tense, uncertain, and increasingly combative.
What’s behind this escalation? The US claims China is dragging its feet on rare earth exports and not living up to its promises. China, meanwhile, says Washington’s new controls on AI chip technology and student visas are the real violations. The result is a dramatic return to the kind of tit-for-tat rhetoric that defined the worst days of the trade war.

The Geneva Agreement: What Did Both Sides Promise?

Let’s rewind to mid-May. After months of mounting tariffs—some as high as 145% on Chinese goods and 125% on US exports—the two countries hammered out a truce in Geneva. Both agreed to suspend the harshest tariffs for 90 days: the US would drop its tariffs to 30%, and China would lower its own to 10%. The deal also included commitments to ease non-tariff barriers and keep critical supply chains—like rare earth metals—flowing. The hope was that this breathing space would allow both sides to negotiate a broader, more lasting solution.
But as many analysts warned, the agreement left a lot unsaid. It didn’t address the deeper issues fueling the trade conflict, like China’s state-driven economic model or US concerns about technology transfer and intellectual property. Still, for a moment, it seemed like both sides were willing to hit pause and talk.

Trump’s Accusations: China Isn’t Holding Up Its End

Fast forward to late May and the mood had soured. President Trump, never one to mince words, took to Truth Social and Fox News to accuse China of “totally violating” the deal. His main complaint? That Beijing was stalling on rare earth exports—materials crucial for US tech and defense industries—and hadn’t removed non-tariff barriers as promised. Trump’s administration responded by announcing a doubling of tariffs on Chinese steel and aluminum to 50%, effective June 4.
US officials also pointed to sluggish progress in trade talks and suggested that only direct intervention by Trump and Xi Jinping could break the deadlock. For American businesses, the uncertainty was palpable: would the truce hold, or was another round of tariff hikes inevitable?

China’s Counterattack: US Is the Real Rule Breaker

Beijing didn’t take the accusations lying down. In a series of statements, China’s Ministry of Commerce insisted that it has “rigorously adhered” to the Geneva consensus and accused the US of undermining the spirit of the agreement. Their list of grievances? New US export controls on AI chips, bans on chip design software sales to China, and even the revocation of student visas for Chinese nationals.
Chinese officials argued that these moves were “discriminatory restrictive measures” that went against both the letter and the spirit of the Geneva deal. They also warned that if the US continues to “damage China’s interests,” Beijing will take “forceful measures” to defend itself. The rhetoric is heating up, and so is the risk of a full-blown return to trade war.

Rare Earths, AI Chips, and Student Visas: Why These Issues Matter

Why are rare earths, AI chips, and student visas suddenly at the center of this dispute? Rare earth metals are essential for everything from smartphones to fighter jets, and China controls most of the world’s supply. The US, worried about supply chain security, wants guaranteed access. Meanwhile, AI chip technology is the new frontier in the tech rivalry—Washington is trying to keep cutting-edge chips out of Chinese hands, citing national security.
Student visas might seem unrelated, but they’re a big deal too. Thousands of Chinese students study in the US, and restrictions are seen by Beijing as a direct attack on people-to-people ties. For investors and companies, these flashpoints mean more uncertainty, higher costs, and the risk that the trade truce could collapse entirely.

Market Reaction: Volatility Returns as Investors Brace for Impact

How did markets react to all this drama? In the days following Trump’s accusations and China’s rebuttals, global stock markets wobbled. The initial Geneva truce had sparked a rally, as investors hoped for a break from tit-for-tat tariffs. But with the new war of words, volatility returned. Steel and aluminum stocks in the US surged on news of higher tariffs, but tech and manufacturing shares slumped amid fears of supply chain disruptions.
Currency markets also reflected the tension, with the yuan weakening slightly against the dollar. For now, most investors are in wait-and-see mode, watching for any signs that Trump and Xi might step in to rescue the deal—or let it unravel.

The Cultural and Political Context: Why This Dispute Feels Different

It’s not just about economics. The US-China trade conflict is deeply tied to national pride, political narratives, and each country’s vision for the future. In the US, Trump’s tough stance on China plays well with voters who feel left behind by globalization. In China, officials frame the dispute as a defense of sovereignty and technological progress.
Both sides are playing to their domestic audiences, making compromise harder. The cultural context—US suspicion of state-driven capitalism, Chinese resentment of perceived Western bullying—means that even small disputes can quickly escalate. For global investors and market participants, understanding these dynamics is crucial. The trade war isn’t just about tariffs; it’s about two worldviews colliding.

What’s Next? Uncertainty Looms Over the Next 90 Days

So, what happens now? Both sides say they’re open to more talks, and there are hints that Trump and Xi could speak directly in the coming days. But with trust at a low point and both nations threatening “forceful measures,” the risk of a renewed trade war is real.
For now, the 90-day truce is hanging by a thread. If the US and China can’t find a way to resolve their differences—on rare earths, technology, and broader economic rules—the global economy could be in for another rough ride. Investors, businesses, and ordinary people around the world will be watching closely.
Have you ever seen a trade dispute escalate this quickly? What do you think it will take for the US and China to find common ground again?