Senior U.S. and Chinese negotiators spent hours behind closed doors in Switzerland on Saturday as they opened high-stakes talks that offer the clearest opportunity yet for the two countries to de-escalate their trade war.

U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are leading the negotiations expected to span two days in Geneva, marking the first publicized, in-person talks since President Donald Trump imposed 145% levies on China and Beijing retaliated with 125% tariffs on many American goods and new export controls on rare earth minerals.

U.S. trade chief Jamieson Greer is also participating in the sessions, which began around 11 a.m. local time. Delegates reconvened after a lunch break to continue their discusstions at the Swiss mission to the United Nations in Geneva, according to people familiar with the matter who demanded anonymity to discuss the sensitive talks.

Both sides have sought to project confidence they hold the upper hand, yet the status quo carries major risks.

The tit-for-tat has rattled financial markets while threatening product shortages and higher prices for American consumers, raising pressure on Trump to find a way out of his standoff with Xi Jinping. The Chinese leader sought to fortify his nation’s economy ahead of the talks, but data show signs of weakness.

The meeting in Switzerland is an “important step in pushing toward a resolution” of the problem, while an eventual solution will require sufficient patience and determination, as well as support from the international community, the official Xinhua News Agency said in a commentary released Saturday while the talks were ongoing. The state-run news agency also reiterated China’s determination to safeguard its national interests and maintain order in international trade.

The U.S. president has sent mixed signals about his desired outcome for the meetings. Trump has repeatedly said he is unwilling to lower tariffs without Chinese concessions, though he nonetheless on Friday volunteered that an 80% levy “seems right.”

“We have to make a great deal for America,” Trump told reporters in the Oval Office late Friday. “I think we’re going to come back with a fair deal for both China and us.”

Bessent on Wednesday downplayed any potential outcome, telling lawmakers talks were at an early stage and the focus was on lowering tensions rather than reaching a comprehensive deal. But Trump himself said Thursday he anticipated “substantive” progress. Other U.S. officials have emphasized the opportunity to defuse the conflict.

Commerce Secretary Howard Lutnick said on Fox News Friday evening that there was “no chance” that tariffs would be completely paused, no matter the outcome of the weekend talks. If those negotiations go well, he added, the levies “come down to a human level. To a level where we do business. There are significant tariffs, the president is going to keep significant tariffs on trade with China. That is his objective. That’s his expectation. That should be everybody’s expectation.”

China is taking a guarded approach, setting expectations low ahead of the negotiations and viewing them more as exploratory than likely to yield an immediate grand bargain. Xi’s representatives will be measuring how serious their US counterparts are in seeking a breakthrough, said Wu Xinbo, director at Fudan University’s Center for American Studies in Shanghai and an adviser to the foreign minister.

Both economies, with a combined gross domestic product of $46 trillion, have a lot to lose if talks falter. Tariffs at the current level will obliterate 90% of bilateral trade, according to a Bloomberg Economics estimate.

Fallout from the trade fight has already appeared, portending more economic pain to come absent an agreement.

Shipping volume from China to the U.S. has slumped. And in China, factories that make everyday consumer items have slowed or idled assembly lines. Two-way annual trade between both countries is around $700 billion, and China has an estimated $1.4 trillion of portfolio investments in the U.S.

The conflict has prompted Beijing to expand trade with other markets, with exports to the U.S. plummeting by 21%. Trade data published Friday show shipments from China to the European Union soaring by 8% last month.

Meanwhile, China’s domestic economy is plagued by lackluster manufacturing figures and a deflationary spiral unlikely to improve as competition in the domestic market intensifies amid a weak labor market.

While the U.S. economy continues to hold up, analysts are warning that goods shortages will begin to surface in the form of empty shelves in the weeks and months ahead, threatening jobs, especially those in trucking, logistics and retail. The Federal Reserve has warned of rising uncertainty. The U.S. economy contracted at the start of the year for the first time since 2022, though a gauge of underlying demand stayed firm.

The consequences of the U.S.-led trade fight are ricocheting across the globe. The World Trade Organization slashed its forecast for merchandise trade this year and now expects volume to decline by 0.2% — almost 3 percentage points lower than it would have been without the trade war. The International Monetary Fund in April sharply lowered its growth expectations this year and next, warning the outlook may deteriorate further.

For Trump, a top goal is rebalancing trade, with the president reiterating Friday he wants to see Beijing open its markets to the U.S. Trump also has repeatedly signaled he views access to the American market as key leverage to force concessions.

“They have a lot to gain” from the talks, Trump told reporters Thursday. “They have far more to gain than we do, in a sense.”

But China sees tariffs as just one aspect of a broader move by the US to limit its rise. To Beijing, the conflict is not just a trade war, said Regina Ip, Hong Kong lawmaker and convener of Chief Executive John Lee’s Cabinet. It threatens its very survival, she said.

“China’s determined to take it on the chin — ‘don’t kneel’ — they’re taking a very hard line,” she said. But, she warned: “Both sides must play their cards very carefully. They must make every move very carefully not to escalate.”

Even a week before the talks, Washington and Beijing were trading barbs over who had initiated them.

One U.S. priority heading into the negotiations was securing an easing of Chinese export restrictions on rare earths used to make magnets used in everything from robots to jet engines.

The Trump administration also wants China to curb fentanyl trafficking by stifling the flow of precursors used to make the opioid. However, continued progress on that issue could be made on a separate track, outside of the Geneva talks.

China said it has forcefully cracked down on the fentanyl trade, and has even said Washington owes it a “big thank you” for its efforts.

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(With assistance from Colum Murphy, Rebecca Choong Wilkins, Jenny Leonard, Daniel Flatley and Shiyin Chen.)

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