On Monday, the U.S. and China agreed to suspend most tariffs on each other’s goods, signaling a reduction in trade tensions between the world’s two largest economies. The agreement reduces “reciprocal” tariffs from 125% to 10%, though U.S. 20% duties on Chinese imports linked to fentanyl remain, resulting in a total tariff rate of 30% on China. U.S. Treasury Secretary Scott Bessent, speaking at a news conference, described the talks as “very productive,” noting that the serene setting of Lake Geneva contributed to the positive negotiation process.
“We have reached an agreement on a 90-day pause and substantially move down the tariff levels. Both sides on the reciprocal tariffs will move their tariffs down 115%,” Bessent said.
The pause will begin Wednesday. Both China and the U.S. said they will continue discussions on economic and trade policy.
Since returning to the White House in January, U.S. President Donald Trump has launched a flurry of aggressive trade measures that jolted financial markets and ratcheted up recession fears. The duties, which are designed to narrow the U.S. trade deficit, hit China particularly hard.
Investors were buoyed by news of the tariff reprieve.
Mark Williams, chief Asia economist at Capital Economics, described the trade war truce as “a substantial de-escalation.”
Meanwhile, Tai Hui, APAC chief market strategist at J.P. Morgan Asset Management, said the magnitude of the U.S.-China tariff reduction was larger than expected.
“This reflects both sides recognizing the economic reality that tariffs will hit global growth and negotiation is a better option going forward,” Hui said in a research note.
“The 90-day period may not be sufficient for the two sides to reach a detailed agreement, but it keeps the pressure on the negotiation process,” he added.
MacDailyNews Note: Bessent said Monday that the trade agreement reached over the weekend represents progress in “strategic” decoupling from China. America imported nearly $440 billion in goods from China in 2024, running a $295.4 billion trade deficit. “We do not want a generalized decoupling from China,” Bessent said Monday on CNBC. “But what we do want is a decoupling for strategic necessities, which we were unable to obtain during Covid and we realized that efficient supply chains were not resilient supply chains.”
President Trump said Monday that China “agreed to open itself up to American business” after the two countries agreed to temporarily slash most of the tariffs on each other’s goods.
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