Duty falls: US and China reach a deal

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The Economist.

Hello and welcome to The Intelligence from The Economist. I'm your host, Rosie Bloor. Every weekday, we provide a fresh perspective on the events shaping your world. After a flurry of leaders visited Kyiv this weekend, Zelensky has laid down the gauntlet. The question is whether Putin will take up his offer for talks in person in Istanbul on Thursday. And the contrast between the quiet and loud parts of a piece of music help keep us listening. But clever audio producers have found a way to manipulate that difference. Now scientists think this technique could be affecting our hearing. First up, though, this morning, another colossal reversal.

China, first row.

China, 67%.

That's tariffs charged to the USA, including currency manipulation, and trade barriers.

So— Trump's tariffs against China were the centerpiece of his grand Liberation Day trade plans. And on both sides, duties had been ratcheting up and up. But this weekend, after negotiations in Geneva, the two countries agreed to substantially cut their respective import tariffs for 90 days.

Both sides on the reciprocal tariffs will move their tariffs down 115% We had very robust discussions. Both sides showed great respect.

The trade war between the two had already been biting in terms of the flow of goods and their price. Markets had been going wild. So is everything now getting back to normal?

This trade deal announced in Geneva has been met with quite a lot of pleasure by the markets and some surprise.

Simon Cox is our China economics editor.

The futures market for the S&P 500, which is the biggest American stock market index, we've seen that jump by over 2%. We've also seen the US dollar strengthening. The announcement was made after markets in China closed, but I expect they'll also react positively tomorrow.

So Simon, what's in this deal?

America imposes a whole bunch of tariffs on China, and they all have different labels. Trump on Liberation Day on April 2nd, when he got up in front of the White House and waved these poster boards around with all these different tariff rates on it, those tariffs were called reciprocal tariffs in his language. And I'm going to use the same language, but just imagine I'm doing a sort of air quotes every time I say reciprocal. But these reciprocal tariffs started out at 34% on China. So China then retaliated with 34% tariff of its own. Then it jumped to 84% because Trump was so annoyed annoyed by China's temerity. So China matched it to 84%, and then Trump went up to 125%, and China duly matched that. So for a while, the world's two biggest economies had these crazy 125% reciprocal tariffs on each other. And in Geneva, both sides, China and the United States, have agreed to cut these crazy reciprocal tariffs by a large amount, down to 10%. Each. Now, you have to bear in mind, as I said, that America imposes other tariffs on China. So principally the tariffs related to the production of fentanyl, this synthetic opioid that Trump's very upset about, those tariffs remain. They're 20%. So add them together, America's imposing 30% tariff on China and China's imposing 10% tariff on America. I hope that's clear.

So that's a huge change. Was this expected?

This was a better deal than at least I expected, and the market reaction suggests it was better than the markets were hoping for too. And the other aspect of the deal that caught me by surprise was China agreeing to roll back some of the other retaliatory measures it took other than tariffs. These might include things like its restrictions on the exports of critical rare earths, which are very important in a lot of manufacturing processes, and perhaps also its investigations of some American companies. In China. We don't have too much detail about that yet, but I was surprised to see it mentioned.

So, Simon, after this extraordinary tit-for-tat retaliation, as you say, who's won? Who comes out ahead on this?

What I'd like to say that, you know, everyone wins. I mean, trade is based on mutual benefit, and therefore cutting off trade is an act of mutual harm. So America cutting tariffs it imposes on China, that's not really a concession to China, that's something that will benefit America's own economy. And of course, one of the background factors here is that perhaps some people in the Trump administration were getting a little bit nervous that consumers were beginning to see prices jump on goods that they had got used to receiving very cheaply from China. So I'd like to say that both sides win. Of course, in the more zero-sum logic of great power rivalry, people like to see these things as fights. A gain to one side is automatically a loss to the other. And there, you know, I think it's interesting. So right now, America's 10% tariff on China is as low as it imposes on any country, including its close allies. And China is reciprocating, so it's matching it with a 10% tariff of its own. Trump came out on April 2nd, Liberation Day, saying that he would look very unkindly on any act of retaliation, any note of defiance. So you could say that this balance they've now struck in some ways favors China compared to how things stood on April 2nd. But I think frankly both sides will breathe a sigh of relief, and let's not get too much into this horrible zero-sum logic that economists like myself find very uncomfortable.

But Simon, Trump himself said that this was what it was all about. So does this mean his big tariff plan is basically off now?

So I should emphasize that this deal only lasts for 90 days, which is not a long time in the rather geological timescale of tariff negotiations, which can usually take years and years. So 90 days to come up with some kind of deal that forestalls another round of raising tariffs is a very short amount of time. So we'll have to see how things look in 90 days. I have to say that both sides in Geneva have said that the tone was good, that discussions were constructive. In particular, America's Treasury Secretary highlighted the fact that China had sent the Minister for Public Security, whose role includes things like illicit drug trafficking. And so that suggested a seriousness about the fentanyl issue that America is basically saying is a good sign. So there were some positive elements from the talks, but these two countries have a long history of trade grievances. The grievances run very deep. They include structural features of each side's economy. So to think that all of that will be resolved in the next 90 days is frankly unrealistic. So we could see perhaps a return to some of the horrible tariff tit-for-tat negotiations and retaliation that we've just put behind us.

Simon, thank you so much.

My pleasure.

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Ukraine's President Volodymyr Zelensky has challenged Vladimir Putin to meet him in person for peace talks within the week. But Zelensky said discussions would depend on a ceasefire that Putin has so far refused. After an extraordinary back-and-forth between world leaders in recent weeks, the prospect of talks now is still full of uncertainty.

It had the swagger of a Wild West showdown.

Oliver Carroll is a foreign correspondent for The Economist based in Kyiv.

"Guns away. I'll be waiting for you Thursday," Zelensky said. "Osobisto. Personally." You could almost hear the saloon doors shut behind him. Of course, the theatre was deliberate. But the boldness of that message won't have been lost on Vladimir Putin, a man who, let's remember, sent teams to Kyiv in 2022 to either capture or assassinate Zelensky. For Zelensky, it was a crafty response to what was actually a very difficult situation.

Ollie, we've had so much back and forth this weekend. Just run us through what happened, how we got here.

Over the weekend, European leaders, 4 of them, came to Kyiv for this show of unity.

And so all of us here, together with the US, are calling Putin out. If he's serious about peace, then he has a chance to show it now.

And what they were trying to do was to throw down a ceasefire ultimatum to Putin. But also, there was only really one person in the room, and that was Donald Trump. Their aim was to show to Donald Trump that if his Plan A had failed, the idea of this peace in 24 hours, it was not Ukraine's fault, and the time was to work on Plan B. Unfortunately, the ultimatum faltered at the first test. Putin did his own show early in the morning on Sunday. Presumably after spending all day in talks with his people and probably with Mr. Trump too, he offered peace talks in Istanbul instead. Now this is a pretty hollow gesture in comparison to the compromise that Ukraine was willing to go to, but it was enough for Mr. Trump, who in a Truth Social tweet called it a potentially Great day. So since then, Ukraine has been thinking about how they could get around this false offer, to reject the idea of talks with guns to their head and strings attached. And it had to sort of work out a way to say no cleverly without losing Trump, keeping pressure on Putin, and keeping close to that original message that the European leaders were pushing, that Russia is the one blocking peace. So hence the gauntlet Zelensky threw down to Putin.

So, Ollie, we've got the astonishing prospect of peace talks in Istanbul on Thursday. Will it happen?

Putin is unlikely to make the security call and agree to such an unscripted situation at short notice. He doesn't like to be forced to do anything, or at least to be seen to do anything. And then the question is, I mean, could it happen while fighting is ongoing? I mean, you'd assume not. Zelensky, in his challenge to Putin, seemed to make it contingent on a ceasefire, but I've been told that it wouldn't necessarily have to hinge on that ceasefire. Things will depend on the intensity of Russian attacks, how the front line looks in the coming days. But we wait and see. I mean, like much else, we're in pretty much uncharted territory. But when Putin and, you know, later his foreign policy advisor Yuriy Ushakov made the call for these Istanbul talks, I think they assumed it would be teams negotiating with teams, and in that respect, it would be another step towards normalization of Russia's image. Negotiations as a stage in war rather than an end to it. And that was fairly clever, you know, in the conditions they added. They also said they would pick up from talks which were abandoned in 2022 at a time when Russian forces were still around Kyiv. In reality, those talks were never really seriously finished. There were very many disadvantageous points for Ukraine, such as the massive degrading of its army.

So does that mean that Putin has the upper hand here?

Saturday had certainly been designed to put clarity on the situation. The visit was all about creating morale, a united front of European leaders with Ukraine, but it was also an attempt to clarify and force the process. The problem was it was easy to bat away, and of course that Trump chose this pretty equivocational stance despite earlier threats to impose sanctions. Now, I've been speaking to some of the participants of the talks, people in the room. They say they still believe that Trump want a ceasefire, that this is a sort of holding position. But even on the day, I felt the smiles of some of the people, they looked nervous smiles. I've just come back from Washington myself and had a few meetings with people in and around the Trump team, and what they were telling me is that Trump is this empty vessel, not an ideological man at heart, but you need to keep filling that vessel with positions and logic. There's ambiguity in the White House right now. You see this in some of the public statements of his special representative Keith Kellogg. Who repeated the European position. Mr. Trump is the center of gravity around which everyone, all sides, are orbiting. Everyone is tailoring their rhetoric to echo his language. Everyone is repeating his social media posts. What we can say is that the speed of things— you see there's motion, you see there's a lot of back-channel bargaining happening right now and in the coming days. No one really knows the final destination, but it does seem that we're coming to a pretty key fork in the road in the next few days and weeks.

How optimistic are you about these talks?

Ultimately, it comes down to Vladimir Putin. Has he made his mind up on whether he wants to end war? I'm not sure on that. Despite the really sluggish progress of Russians on the battlefield and the stabilization of the front line to a certain degree, though that's sort of changing in the last few weeks, Mr. Putin believes that he can break Ukraine still in a serious way. Seeing as the Ukrainians are very good on a tactical level and they've developed a very high-tech way of monitoring the front line with drones and basically stopping any movement from the Russians before it even starts. The real vulnerability of Ukraine is way back from the front line. It's in the towns and the cities which are being pummeled by Russian drones and Russian missiles. And it's a psychological front which I think Putin thinks he can still break. At the same time, if he can be persuaded by Donald Trump, if the carrots and the sticks are long enough. Who knows? Trump has mentioned Lindsey Graham's very harsh package of sanctions which she's developed in the Senate. Lots will depend on European persistence and unity, but fundamentally it still depends on Mr. Trump. He's the maypole around which everyone is dancing, and the problem is that Mr. Putin is playing an equally tough game, and so far it looks like it's Mr. Trump dancing around him.

Ollie, great to talk to you. Thank you so much.

It's always great to chat, Rosie.

We hope you enjoy listening to The Intelligence as much as we all enjoy making it, but we're always looking for ways to improve. And to do that, we need you, our listeners. Please help us by filling out a short survey. Go to www.economist.com/tisurvey. Or follow the link in the notes for this episode. Thank you. Okay, here's a challenge. We're going to play various clips. Dear listener at home, see if you can spot the difference. Here's the first clip.

The thoughts of the rabbit on sex are seldom, if ever, complex, for a rabbit in need is a rabbit indeed and does just as a person expects. And a second version: The thoughts of the rabbit on sex are seldom, if ever, complex, for a rabbit in need is a rabbit indeed, and does just as a person expects.

What do you think? Okay, let's try another. Listen to this. And now something Pretty similar? Seems like we might need an expert to explain what's going on here.

The fictional band Spinal Tap could crank out extra volume because they had amplifiers that famously went up to 11.

David Adam writes about science for The Economist.

Unfortunately, most music and audio producers, they don't have that option. So compression is a way to make things sound louder.

And why would you want things to sound louder, if that isn't too silly a question?

Let's say if I was one of those people who on a podcast was to speak really loudly to emphasize a point, or to speak really quietly to emphasize a point, After a while, that might get a bit annoying, and you at The Economist might like to have more of a consistent tone and a consistent volume. So when people listen to your podcast, they're not constantly either straining to hear what people say or shielding their ears. But compression is a way to do that. If you imagine the loudness of my voice as peaks, so the small peaks are the quiet bits and the high peaks are the loud bits, you can nudge the peaks closer together. You can bring the highest peaks down, so you can make the loudest bits slightly quieter, and you can bring the smallest peaks up, so you can make the quieter bits slightly louder, which means that everything just has sort of a more even tone.

I can see that for the spoken word, but what about music? Surely it lives and dies by the contrast?

Well, you would think so, wouldn't you? Unless, I suppose, you were trying to sell records that are played on the radio, and you don't want quiet bits. You want your records to be loud. You might want the quieter bits of your music not to be overwhelmed by ambient noise. But it generally makes music sound fuller, if you like, without what they call the dynamic range.

Aside from a slight trickery of what happens behind the scenes, why does this matter?

It matters partly because music purists think that you're losing something. People who listen to a lot of compressed sound often complain that it just feels exhausting. There's a very preliminary study that's come out of research in France. And they have looked at the impact of compression on the way that the hearing of guinea pigs— literally guinea pigs are the guinea pigs in this experiment— how the hearing of those animals is affected by compressed music compared with non-compressed music.

David, I've got a vision here of sending a bunch of guinea pigs into a club. How did they do this?

Well, the guinea pigs may have preferred that because the guinea pigs basically had to sit while the scientists played two versions of the Adele single from 2015, 15 called "I Miss You" on a loop for 4 hours. Half the animals heard the regular version of the song, and half heard a version that the scientists had compressed to within an inch of its life. They did choose the guinea pigs partly because their hearing is in a similar frequency range to ours, but also they are famously placid. All the animals suffered short-term hearing damage. There's a very small muscle, probably the smallest in the human body, in the ear called the stapedius muscle, and it forms a reflex protection against very loud noise. So very loud noises, this muscle activates and it basically stiffens everything up inside the ear and makes it harder for the vibrations to be transmitted in a way to try and protect the sensitive material of the inner ear. It's like a lid being shut, I suppose, very quickly in response to a loud noise. And they found that the day after, both groups of guinea pigs, the stapedius muscle was fatigued and didn't work properly. But in the animals that heard the non-compressed music, the muscle recovered within a day or so. But the animals who heard the compressed music, a week later, that muscle, that response, was still about at half of its normal value.

So presumably the answer here is stop compression.

Well, for guinea pigs, it's a study in animals. There's so many questions, and the scientists wouldn't claim to be saying we should not be compressing music. No one should panic about this. I think what they would say is that this draws attention to something that hasn't had attention before. There is potential there for harm, if you'll excuse the phrase. I think it does show that artists and producers and podcast makers maybe who are fond of compression may start to feel the squeeze.

David, thank you so much. I'm now going to sit in a room and listen to Adele for 4 hours.

Well, good luck.

That's all for this episode of The Intelligence. We'll see you back here tomorrow.

With no fees or minimums on checking accounts, it's no wonder the Capital One Bank Guy is so passionate about banking with Capital One. If he were here, he wouldn't just tell you about no fees or minimums. He'd also talk about how most Capital One Cafés are open 7 days a week to assist with your banking needs. Yep, even on weekends. It's pretty much all he talks about, in a good way. What's in your wallet? Terms apply. See capitalone.com/bank. Capital One NA member FDIC.