“Beijing will also look to reduce levies on US fish and seafood, logs and wood products, cosmetics, and medical devices,” the Trump administration noted further.

In another list were Washington’s reciprocal tariff cuts for small Chinese appliances such as coffee makers and toasters, tableware, blankets, and bed linens.

The lists also included toys, fireworks, artificial flowers, Christmas tree lamps, and other holiday decorations, along with children’s car seats.

China’s commerce ministry, through a press briefing on Monday, said that a two-month extension of a trade truce with the United States through to January 10 would provide room for both sides to evaluate their ongoing arrangement to resolve economic and trade issues while considering how to advance on those fronts.

“The extension also provides a relatively stable and predictable policy environment for cooperation among companies and continued active discussions,” the Xi administration remarked.

“Both sides will hold regular talks on potential investment opportunities and barriers, enhancing policy transparency and predictability, and responding to enterprises’ concerns,” Beijing said.

China’s choice of products for tariff cuts was designed to help Beijing meet what the Trump administration says is a USD 17 billion commitment to buy agricultural goods.

Beijing has already resumed large-scale purchases of US soybeans under a deal struck last year to buy 25 million metric tons annually.

“Both countries will set ⁠up an agriculture working group under a trade council, which will hold its first meeting before the year ends to discuss two-way market access and regulation,” the p said.

As per the White House press release, the presidential summit also yielded an agreement for China to import 10 million metric tons of coal annually from the United States in 2027 and 2028.

That amount roughly equals 2% of ⁠China’s coal imports each year.

“Importing US coal is not only a beneficial supplement to China’s domestic coal market but also brings stable economic income and employment to the US coal industry,” the Chinese ministry said.

On the banking front, China will also examine and approve foreign financial services institutions, including those with US capital, to conduct business and open branches in the world’s second-largest economy.

“There will also be continued communication on increasing flights between China and the United States,” the commerce ministry concluded.

The WTO described the situation as a form of “prisoner’s dilemma”, in which governments may find it rational to protect their own economies, even when coordinated action would produce better results for everyone.

The problem is particularly acute when major economies impose tariffs on one another. Higher trade barriers can increase costs for businesses, disrupt supply chains and reduce the incentive to invest across borders.

The report said the rise of state intervention, together with changing economic power and geopolitical tensions, had made the existing trade rules increasingly difficult to apply.

Developing economies at risk
Poorer countries are likely to bear a disproportionate share of the economic damage if trade fragmentation continues.

Developing economies often depend heavily on access to international markets, foreign investment and predictable trading conditions. A more fragmented system could limit their export opportunities, raise import costs and make it harder to attract investment.

The WTO warned that the impact on the poorest economies could be several times greater than The WTO cautioned that the poorest economies could experience an impact several times greater than that of richer nations. by richer nations.

For countries in Asia and Africa, where export-led growth remains an important development strategy, the consequences could include weaker industrial activity, slower job creation and reduced income growth.

The report’s warning comes as developing countries face pressure to navigate competing trade and investment arrangements while managing higher costs and uncertain demand.

Dispute settlement and digital trade
The WTO’s dispute settlement system is another area requiring reform.

The organisation’s Appellate Body has been unable to function since 2019, leaving members without a fully operational system for resolving trade disputes. The failure to restore the mechanism has weakened confidence in the rules-based system and encouraged countries to pursue alternative approaches.

The WTO also needs to update its rules to reflect changes in the global economy.

Digital trade, artificial intelligence (AI), cross-border data flows and new technologies have created economic activity that was not adequately covered by many of the existing agreements.

Subsidies and industrial policy have also become more important as governments seek to support domestic production in sectors such as semiconductors, electric vehicles and clean energy.

The WTO said its rules must evolve to address these changes while preserving the benefits of a predictable international trading system.

A USD 3 trillion opportunity
The report’s estimate of a 3% increase in global GDP under stronger multilateral cooperation highlights the economic value of reform.

The potential gain of roughly USD 3 trillion by 2050 would come from greater trade integration, reduced barriers and improved economic efficiency.

The WTO said stronger cooperation could also increase global exports by nearly 18%, creating opportunities for businesses and workers across a wide range of sectors.

However, achieving those gains will require political agreement among members, including major economies whose trade policies increasingly reflect strategic and national security priorities.

The road ahead
The WTO has urged members to strengthen the multilateral system rather than allowing it to weaken further.

The organisation’s message is that reform is necessary not only to prevent damaging economic fragmentation but also to ensure that trade continues to support growth and development.

The challenge is whether governments can agree on changes to the institution’s rules, decision-making procedures and dispute settlement system at a time when geopolitical tensions are encouraging more unilateral action.

For the global economy, the stakes are substantial. The WTO’s projections indicate that the choice between cooperation and fragmentation could shape economic output, trade flows and development prospects for decades.

The warning comes at a time when tariffs, industrial policy, and geopolitical rivalry are already reshaping global trade.

Without reform, the institution risks losing its ability to provide a common framework for international commerce.

The WTO’s central argument is clear: preserving an open and predictable trading system is not simply a matter of trade policy. It is a requirement for protecting global economic growth through 2050.

Stating that Washington viewed those vehicles differently, Lutnick said, “It’s a whole different category. It was never raised. These were things they fit to make it end.”

As per the reports, the trade deal ⁠that fell apart would have cut the top-line tariff rate on Canadian cars and light-duty trucks from 25% to 15%.

As per Barclays, Canadian-built vehicles accounted for only about 6% of US sales in 2025. Still, as per the British bank’s estimates, if the current tariffs double, automakers including Ford Motor, General Motors, Jeep-maker Stellantis, Toyota, and Honda would face significant added costs on some of their most important models.

Simultaneously, a higher levy on vehicle parts would inflict pain across the American automotive supply chain.

Detroit auto executives, for quite some time, have been pressing their case to the Trump administration about how the tariff warfare over the past 18 months has left them in a worse position than Asian and European rivals.

While import tariffs from those markets stand at 15% due to the trade deals struck in 2025 with those nations, Trump’s levies have remained at 25% on Detroit automakers’ biggest trading partners, Mexico and Canada, with some relief on the value of their US content.

The administration reportedly floated the idea of requiring imported cars from Canada and Mexico to have half their content come from US-made parts to qualify for lower tariffs. Imports from Asia and Europe face no such content requirements.

For General Motors, about ⁠17% of its Chevrolet Silverado pickup-truck production, its top-selling model, is located in Canada. For Stellantis, the US’ northern neighbor has emerged as the sole manufacturing site for its Chrysler Pacifica, one of its top-selling American models.

Ford, on the other hand, is set to start importing Super Duty large trucks from a plant in Oakville.

Among the non-American players, Toyota and Honda, according to Global Automakers of Canada, would ⁠be most exposed to the higher tariffs, as the two Japanese automakers accounted for more than 75% of the 1.2 million vehicles produced in the country in 2025, and many of those were shipped to the United States.

Commerce Secretary Howard Lutnick is backing a framework under which companies could receive duty-free access for a specified volume of imported chips, with the allowance tied to commitments to manufacture in the world’s largest economy.

Officials are also considering a phase-in period, while tariff rates, quotas and other details remain unsettled.

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The proposal has triggered concern across the American technology circuit, which is already facing tight supplies of advanced semiconductors as companies spend hundreds of billions of dollars building data centres for AI services.

Technology groups are lobbying for exemptions similar to those included in earlier tariff measures, arguing that broader duties could make AI infrastructure pricier and less predictable.

Industry representatives have warned that the timing is particularly difficult. Advanced chip factories cost billions of dollars and can take years to build, leaving American Big Tech dependent on suppliers in Asia while domestic capacity expands.

Taiwan produces more than 90% of the world’s most advanced semiconductors, while Malaysia and South Korea are also important suppliers.

That creates a dilemma for the Trump administration. Tariffs could encourage manufacturers to establish more capacity in America, supporting a strategic objective that has gained importance amid concerns about supply-chain resilience and national security.

But imposing duties before domestic production can meet demand could increase costs for the same technology companies Washington wants to lead the global AI race.

The pressure is particularly acute for data centre operators. The hyperscalers are committing giant sums to new computing campuses and competing for high-end chips, driving the industry into a record investment cycle.

A tariff on semiconductors and equipment containing them could increase the cost of servers and other infrastructure just as companies are trying to expand computing capacity.

The potential duties could also affect US chip designers such as Nvidia and Advanced Micro Devices (AMD), which depend on overseas manufacturing. Apple and other electronics companies could face higher input costs and potentially lose competitiveness against overseas rivals that can purchase the same components without paying US import duties.

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Technology companies have therefore intensified their lobbying efforts. Industry representatives and lobbyists have met senior Commerce Department officials with increasing frequency, pressing for exemptions for data centres, research and development, start-ups, consumer applications, civil industrial uses and public-sector projects.

Some discussions have reportedly become less favourable to those exemptions, with Commerce officials arguing that tariffs need to be broad enough to persuade chipmakers to increase US production.

The administration’s challenge is to design a system that changes corporate investment decisions without creating an immediate shortage or cost shock.

The proposed approach resembles an agreement reached with Taiwan earlier this year under which Taiwan Semiconductor Manufacturing Co, or TSMC, can import some chips into the US duty-free while committing to expand American production.

TSMC has pledged USD 265 billion for its Arizona operations, described as the largest foreign direct investment in US history.

Even that investment illustrates the scale of the challenge. TSMC expects only about 30% of its most advanced capacity to be located in Arizona once its planned build-out is complete, and much of that capacity remains years away. Industry representatives estimate that a meaningful expansion of US semiconductor manufacturing could take more than five years.

This creates a potential mismatch between tariff policy and available supply. If the volume of chips eligible for duty-free entry is based on companies’ US manufacturing commitments, allowances could fall well short of the quantities required by major technology companies.

The resulting gap could leave businesses paying tariffs on components that are not yet available domestically.

The wider semiconductor supply chain would also experience the impact. Higher import costs could flow through to servers, computers, televisions and other electronics, increasing expenses for manufacturers and potentially consumers.

For companies operating on large technology investment budgets, even relatively small increases in component prices can become significant when multiplied across thousands of servers and large data centre projects.

The administration argues that reshoring is essential for economic and national security. White House spokesperson Kush Desai said semiconductor manufacturing remained a priority and that the administration’s policies had already secured hundreds of billions of dollars in investment in the sector.

Trade officials have also stressed the geopolitical dimension. Heavy US dependence on Taiwanese semiconductor production is viewed as a strategic vulnerability because any conflict involving Taiwan could disrupt supplies of the chips on which the US technology industry relies.

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Yet economists and industry groups say tariffs alone cannot create a domestic semiconductor ecosystem.

Building factories requires skilled technicians, reliable electricity and water supplies, qualified suppliers and faster permitting, as well as billions of dollars in capital. Making imported chips more expensive does not immediately provide any of those resources.

The debate therefore goes beyond the proposed tariff rate. It concerns whether Washington can expand domestic semiconductor capacity quickly enough to reduce reliance on Asia without undermining the AI infrastructure boom before alternative supplies are available.

US Trade Representative Jamieson Greer said in May that no new semiconductor tariffs were imminent at that time, although he argued that duties could help protect the sector and encourage production to return to the US. The latest discussions suggest the issue remains active.

For technology companies, the uncertainty itself is becoming a business risk. If tariffs, quotas and exemptions remain unclear while companies commit billions of dollars to data centres, investment decisions become harder to calculate.

For Washington, the challenge is balancing two strategic goals: creating a resilient domestic semiconductor industry and maintaining the supply of chips needed to establish US leadership in artificial intelligence.

The new tariff proposal aims to meet both goals, but the industry says that adding costs before the domestic capacity is ready could make the change harder and slow down the AI growth that the policy is meant to encourage.

However, Treasury Secretary Scott Bessent, while addressing the media on Monday, stated that the Republican wants Canada to come to the table and negotiate in good faith.

At a press conference in Quebec, Canadian Prime Minister Mark Carney, one of the few world leaders to confront Washington’s strong-arming tactics and trade leverage, stated that a “mutually beneficial deal” with the United States was possible, provided Americans respect Canada’s sovereignty.

“When the Americans go to the negotiating table first with the right attitude towards our industry and a true partnership, of course we’ll come to the negotiating table,” Carney said.

Auto stocks, as expected, negatively reacted to the developments, with shares of Ford, Stellantis, General Motors, Toyota, Honda and others going into the red.

As per the analysts, Trump’s strong-arming tactics against Canada threaten one of the most lucrative bilateral trade partnerships. While Ottawa has consistently been one of the top two US trading partners, in 2025, the exchange of goods totalled USD 872.3 billion, ‌down 4.6%.

Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, said, “A threatened US tariff on Canadian auto parts will be paid by the U.S. auto assembly. Without those specific parts, auto assembly throughout the U.S. would halt.”

Canada’s retaliatory tariffs on American goods will start on September 8, in a sweet return to 50% levies ordered by Trump on USD 20 billion in Canadian products.

“You’re at war when you get ⁠attacked. We got attacked,” Carney said on Saturday (August 22) when asked whether Canada was engaged in a trade war.

An opinion poll by the Angus Reid Institute found that three in four Canadians approved of Carney’s decision to walk away from trade negotiations with the United States.

As per the White House, many automakers have announced or are considering plans to scale back Canadian auto production, with the trade standoff leading to a 22% reduction ⁠in Canadian imports of American vehicles.

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Other areas covered in the new bilateral agreement include rules of origin and trade facilitation, trade in services, digital trade, competition, and ‌economic ⁠and technical cooperation.

China has emerged as Switzerland’s third biggest trade partner after Germany and the United States, with bilateral trade amounting to 46 billion Swiss francs (USD 57.6 billion) so far in 2026.

Trade between the two countries has ⁠expanded from 31.7 billion francs in 2015 to 51.2 billion francs in 2025, stated the figures from the Swiss customs office.

The world’s second-largest economy has also become a big market for Swiss chemicals, pharmaceuticals, precision instruments, and watches.

Both sides are eyeing the year-end deadline for the updated deal’s signing. However, it will be subject to the legal review and domestic approval processes in both countries.

The development also coincides with Switzerland’s position in the midst of the US-China rivalry. Last summer, Washington imposed a 39% tariff on Swiss goods, at the time the highest rate among developed nations. A preliminary US-Swiss agreement would cap tariffs at 15%, but that deal is not legally binding yet.

Complicating things further, in July this year, Switzerland found its name among 60 countries that would face new US tariffs for allegedly not doing enough to combat forced labour. A 12.5% tariff has been imposed on Swiss goods.

Analysts view the China deal as a timely diversification for Switzerland, aimed at partially compensating for its volatile economic position that resulted from the trade uncertainties arising from the American shore. Beijing has also agreed to stricter rules on labour rights and environmental issues in a revised sustainability chapter of the deal.

Meanwhile, the Parmelin government has recommended the Swiss Parliament reject an initiative aimed at blocking a new agreement between Switzerland and the European Union (EU) that would mark ‌the biggest overhaul in bilateral economic relations in a generation.

Backed by the billionaire founders of Swiss asset manager and private equity firm Partners Group, the so-called “Kompass-Initiative” aims to protect Swiss independence by broadening the scope of compulsory referendums on state ⁠treaties.

Agreed in December 2024, the EU-Swiss deal is currently being debated in the Swiss parliament. If passed, it is likely to face a referendum in 2027 at the earliest.

The ruling Federal Council, however, sees the Kompass initiative as creating legal uncertainty, apart from disrupting Switzerland’s established democratic system and threatening legal and economic stability.

“Instead of clarity, it creates more uncertainty and problems,” Justice Minister Beat Jans told a ‌press ⁠conference.

The initiative aims to require approval for international treaties not only from a majority of voters but also from a majority of its 26 cantons, thereby increasing the threshold for passing such accords.

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The Kompass initiative also opposes the ⁠so-called “dynamic alignment” of laws under the EU-Swiss deal, in which Bern, subject to its own constitutional safeguards, adapts its legislation to relevant changes ⁠in EU law.

On Tuesday (August 18), the yield on the 30-year Treasury briefly climbed to its highest level since 2007, while recent auctions have also shown investors demanding significantly higher returns.

At a recent auction, the 10-year Treasury note was sold at a high yield of 4.683%, the highest in 19 years, while a 30-year bond auction cleared at 5.216%, a 25-year high.

The rise in yields means the government must pay more to refinance maturing debt and fund new deficits, creating a feedback loop in which higher interest costs can themselves contribute to larger borrowing requirements.

The CBO expects the federal budget deficit to reach USD 1.9 trillion in fiscal 2026, equivalent to 5.8% of gross domestic product. It projects the deficit will widen to USD 3.1 trillion, or 6.7% of GDP, by 2036.

Rising net interest costs account for much of the deterioration, with interest payments projected to increase from about USD 1 trillion this year to USD 2.1 trillion by 2036.

The scale of the interest burden is already becoming visible in government finances.

The implications extend beyond government accounts. Treasury securities form the benchmark for borrowing across the US economy, so sustained increases in government yields can feed into mortgage rates, corporate borrowing costs, and other forms of credit.

Yet the recent rise in yields does not indicate that investors are abandoning US debt. Treasury auctions continue to attract solid demand, including from foreign central banks, institutional investors, and asset managers.

The more immediate concern is the scale and persistence of borrowing. CBO projections show debt held by the public rising from 101% of GDP in 2026 to 120% by 2036, surpassing the previous post-war record. Gross federal debt is projected to reach USD 64 trillion by 2036 under the agency’s baseline assumptions.

The approach of USD 40 trillion also brings the next debt-ceiling confrontation closer. Congress set the statutory borrowing limit at USD 41.1 trillion in 2025, but analysts now expect Treasury to approach that threshold as early as the beginning of next year. That could force lawmakers to raise or suspend the ceiling again to prevent a disruption in government payments.

For markets, the central question is no longer simply whether Washington can continue borrowing. It is how much investors will demand to finance it. With deficits remaining large and interest costs rising, the journey beyond USD 40 trillion is likely to keep fiscal sustainability and Treasury yields firmly in the spotlight.