US-China trade negotiations: Tariffs on goods to be reduced to 10%.
On May 12th in Geneva, the United States and China reached a provisional agreement to drastically reduce tariffs on each other's goods. Under the agreement, current tariffs will be reduced by more than 100%, bringing them down to a baseline of 10%.
This is an effort by the world's two largest economies to de-escalate the protracted trade war, which has raised concerns about a recession and destabilized global financial markets.
US Treasury Secretary Scott Bessent announced after talks with Chinese officials that the two sides had agreed to temporarily suspend tariffs for 90 days. Accordingly, the current tariff rate will be reduced by more than 100 basis points, bringing it back to a baseline of 10%.
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Both countries effectively protected their national interests and aimed for a balanced trade. This statement helped the US dollar appreciate against major currencies and helped reassure markets, which had been in turmoil since President Donald Trump restarted the tariff war last month.
Speaking alongside U.S. Trade Representative Jamieson Greer, Bessent said both sides agreed that neither wanted an "economic embargo."
He likened the recent high tariffs to an embargo, something neither side wanted. Instead, both the US and China want to maintain normal trade.
The meeting in Geneva marked the first time senior economic officials from both countries had held direct talks since Trump returned to the White House and launched a wave of global tariffs, with China being the biggest target with numerous high tariffs.
Since the start of his second term in January, Trump has increased tariffs on Chinese imports to 145%, not including tariffs already imposed during his first term and measures taken by the previous Biden administration.
In response, China imposed export restrictions on certain rare earth elements, which are crucial to the US defense and electronics industries, and raised tariffs on US goods to 125%.
The trade war between the US and China nearly paralyzed bilateral trade worth almost $600 billion. This disrupted global supply chains, raised concerns about recession and inflation, and led to several rounds of job layoffs.
However, after signs of easing tensions, financial markets reacted positively. Stock index futures on Wall Street rose on hopes of avoiding a global recession.
Zhiwei Zhang, chief economist at Pinpoint Asset Management in Hong Kong, said he was surprised by the outcome of the negotiations, as he had initially only expected the tariff reduction to around 50%. He assessed this as a positive signal not only for the economies of the two countries but also for the global economy, and it eased investor concerns about short-term supply chain disruptions.
Following Sunday's meeting, the US side affirmed that the two sides had reached an agreement to reduce the US trade deficit. Meanwhile, China announced that the two countries had reached "important consensus" and would launch a new economic dialogue forum.
US President Donald Trump expressed optimism even before the negotiations concluded. He said that the two sides had had a "full restart" in a friendly but constructive atmosphere.
Trump's earlier tariffs were implemented in part after he declared a national emergency due to the influx of the dangerous drug fentanyl into the US. US Trade Representative Jamieson Greer said discussions about controlling fentanyl were very constructive, even though they were separate from the trade negotiations.
Chinese Vice Premier He Lifeng also offered a more cautious statement, but still praised the “significant progress” made following the talks, which took place at the Swiss ambassador’s private villa on Lake Geneva.
