Omotayo Adigun
The United States and China announced a significant agreement on Monday to drastically reduce their tit-for-tat tariffs for a 90-day period. This development, following their first high-level discussions since the initiation of the US-China trade war by President Donald Trump, sent global financial markets soaring after weeks of instability fueled by concerns over the tariffs’ impact on the global economy.
In a joint statement released after the talks, the world’s two largest economies committed to lowering their existing triple-digit tariffs to single-digit figures and to continue negotiations aimed at a more comprehensive resolution.
The announcement triggered a strong positive reaction in stock markets, which had previously experienced significant downturns in response to the global tariffs imposed by the Trump administration. Major Wall Street indexes, including the broad-based S&P 500, experienced substantial gains in early trading on Monday, with the S&P 500 surging by 3.0 percent.
US Treasury Secretary Scott Bessent characterized the weekend discussions with Chinese Vice Premier He Lifeng and international trade representative Li Chenggang as “productive” and “robust.” Bessent indicated that both sides anticipate further meetings in the near future to build upon the progress made. “Both sides showed a great respect,” Bessent told reporters.
The tariffs imposed by the United States on numerous imports from China had reached as high as 145 percent this year, significantly higher than the 10 percent duties levied on goods from other countries as part of the global tariff blitz initiated the previous month. Beijing had retaliated with duties of 125 percent on US goods.
Under the newly agreed terms, the United States has committed to lowering its tariffs on Chinese goods to 30 percent, while China will reduce its tariffs on US goods to 10 percent for the 90-day negotiation period.
Speaking to CNBC on Monday, Secretary Bessent expressed his expectation that US and Chinese representatives would convene again within the coming weeks to work towards “a more fulsome agreement.”
He clarified that while the United States does not seek a broad decoupling of its economy from China, it does aim for “a decoupling for strategic necessities” – goods and materials the US struggled to obtain during the Covid-19 pandemic.
Bessent further explained that the 90-day pause in escalating tariffs is also intended to provide an opportunity to address non-tariff barriers that have been weighing on US businesses operating in China.
China hailed the “substantial progress” achieved during the talks, which were held at the Swiss ambassador’s discreet villa residence to the United Nations in Geneva. The Chinese commerce ministry stated that this move “is in the interest of the two countries and the common interest of the world.”
The ministry also expressed its hope that Washington would continue to work with China “to correct the wrong practice of unilateral tariff rises.”
A notable point of divergence remains the US tariffs related to fentanyl production. US Trade Representative Jamieson Greer informed reporters that the additional 20 percent levy imposed by the US due to concerns over Chinese exports of chemicals used in fentanyl production would remain unchanged for the time being.
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However, Greer added that “both the Chinese and United States agreed to work constructively together on fentanyl and there is a positive path forward there as well.”
In their joint statement, the two nations agreed to “establish a mechanism to continue discussions about economic and trade relations.”
Secretary Bessent expressed optimism about this framework, stating, “I think we leave with a very good mechanism to avoid the unfortunate escalations.”
He noted that the existing tariffs had effectively created a trade “embargo” between the two superpowers, adding, “The nature of what has happened since April 2 could have been avoided if we had had this kind of mechanism in place.”
China’s commerce ministry indicated that both sides “will conduct rolling consultations on a regular or ad hoc basis in China, the US or agreed third countries.”
Despite the positive developments, uncertainties persist regarding the long-term outcome of the negotiations. Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, described the outcome of the weekend meeting as a “success” for Beijing, noting that “China took a tough stance on the US threat of high tariffs and eventually managed to get the tariffs down significantly without making concessions.”
Wang Wen, Dean of Chongyang Institute for Financial Studies at Renmin University of China, lauded the agreement as having “exceeded expectations,” calling it “the biggest easing of tensions” since the global tariff war commenced. However, he cautioned that a resumption of the tariff war remains possible if no further progress is made within the 90-day negotiation window.
The tariffs imposed by the Trump administration on China had previously rattled financial markets, raising concerns about a potential resurgence of inflation and a global economic downturn. The Geneva meeting occurred days after Trump unveiled a trade agreement with Britain, marking the first such agreement with any country since the implementation of his new duties on both allied and adversarial nations.
World Trade Organization (WTO) head Ngozi Okonjo-Iweala praised the talks on Sunday, characterizing them as a “significant step forward” in de-escalating trade tensions between the two global economic powerhouses.