The uneasy truce between the United States and China is being tested again. American-backed strikes on Iran, including the killing of Ayatollah Ali Khamenei, have drawn sharp condemnation from Beijing. Yet even as tensions rise, both sides appear determined to keep trade talks alive.

The question now is whether economic cooperation can survive growing geopolitical friction.

The Current State of Trade Talks

Despite the Iran strikes, trade negotiations are moving forward. According to multiple reports, U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are expected to meet in Paris in mid March. The talks are seen as groundwork for a potential summit between President Donald Trump and Chinese President Xi Jinping.

Key issues on the table include a possible Chinese purchase of Boeing aircraft, renewed commitments to buy U.S. soybeans, and broader strategic matters such as Taiwan. The discussions are part of what officials describe as efforts to stabilize economic ties between the world’s two largest economies.

An interim trade deal reached in late October had rolled back some punitive U.S. tariffs, while Beijing paused sweeping rare earth export controls. Tariffs on Chinese exports to the United States were set to remain around 47.5 percent, down from earlier highs above 100 percent during peak tensions.

In short, the talks are real and ongoing. But they rest on thin trust.

Iran Complicates the Picture

The U.S. strikes on Iran have created new stress. Beijing quickly condemned the attack, with top diplomat Wang Yi accusing the United States and Israel of assassinating another country’s leader and pledging support for Tehran’s sovereignty and security.

China views Iran as a close diplomatic partner in the Middle East. The killing of Khamenei came less than two months after American forces captured Venezuela’s President Nicolás Maduro, another government aligned with Beijing. To many in China, these actions signal a forceful American campaign against countries in its orbit.

At the same time, the conflict has directly affected China. Its foreign ministry confirmed that a Chinese national was killed in Tehran and that thousands of citizens were being evacuated.

For Beijing, the dilemma is clear. How far should it defend Iran without damaging its own economic interests or worsening tensions with Washington.

Tariffs and Threats

President Trump has raised the stakes further by threatening 25 percent tariffs on countries that do business with Iran. “Effective immediately,” he wrote in a Truth Social post.

China, as Iran’s largest trading partner, took notice. A spokesperson for the Chinese Embassy in the United States said Beijing “firmly opposes any illicit unilateral sanctions and long-arm jurisdiction” and warned it would take “all necessary measures” to defend its interests.

Analysts say this could quickly escalate. Deborah Elms, head of trade policy at the Hinrich Foundation, warned that if Trump is serious about the 25 percent rate, “that is a massive escalation from current tariff levels.” She cautioned that the situation could spiral into fresh rounds of tit for tat escalation, potentially “dashing any hopes of U.S. soybean exports to China.” She added, “The last time we played this game, we ended up with tariff levels at 145%.”

Dan Wang of Eurasia Group said, “Trump is eroding the thin trust built around [the] trade truce,” noting that he is widely viewed in China as inconsistent.

Still, some experts see the tariff threat as driven by shifting priorities rather than a coordinated strategy. Scott Kennedy of the Center for Strategic and International Studies said the move appeared to stem from Trump’s “ever shifting focus of attention, not as part of an intentional strategy to gain new leverage over China in advance of the likely April summit.”

Even so, Kennedy added a warning: “China will not hesitate to retaliate in a way that imposes serious costs on the U.S. [and it] has prepared for a variety of scenarios, including this one.”

History suggests both sides may increase pressure ahead of high level meetings. In past episodes, Beijing expanded export controls on rare earths and launched antitrust probes into U.S. firms, while Washington prepared new restrictions on Chinese access to advanced technology.

Dan Wang predicted that “there will likely be several rounds of similar tit for tat, leading up to April meeting.” He suggested China could impose sanctions on U.S. firms tied to Taiwan arms sales or launch antitrust investigations into American tech companies operating in China.

At the same time, analysts note that Beijing has already reduced some trade with Iran under tighter U.S. sanctions. Imports from Iran were on track for a fourth straight year of decline in 2025.

This suggests that while China will protest loudly, it may calibrate its response to avoid a full rupture.

China’s Likely Approach

China is expected to take a prickly but cautious path. Publicly, it will condemn what it sees as regime change and defend Iran’s sovereignty. It may use economic tools, such as regulatory pressure on U.S. firms, to signal displeasure.

However, Beijing must weigh its broader economic interests. The United States remains one of its largest trading partners. With its own economy under strain, China has strong incentives to keep talks alive and secure deals on aircraft, soybeans, and investment flows.

As one professor in Beijing noted, in person meetings are an important indicator of stability. The planned Paris talks suggest that despite harsh rhetoric, both sides still see value in dialogue.

Washington’s Likely Approach

Washington appears ready to separate economic talks from military action. The continuation of trade discussions after the Iran strikes signals that the United States is prepared to act forcefully abroad while maintaining leverage at the negotiating table.

President Trump’s tariff threat underscores that posture. The message is clear. The United States will pursue its strategic objectives, even if that unsettles Beijing.

At the same time, the administration seems willing to keep channels open, aiming for a leaders’ summit in April and reciprocal visits later in the year.

A Fragile Balance

The Iran war has injected new tension into already delicate U.S.-China relations. Beijing has condemned the strikes and faces pressure to defend a partner. Washington has signaled strength and a willingness to use economic pressure.

Yet both sides are still planning to sit down in Paris.

The coming weeks may see sharp rhetoric and targeted moves on both sides. But unless events spiral further, the trade talks are likely to continue. China may protest and push back. The United States is likely to remain firm and unapologetic.

For now, economic self interest is keeping the door open, even as geopolitical conflict tests the limits of trust.