US and China Agree to Tariff Reduction Deal, Pausing Trade War Escalation
Geneva, May 12 (Reuters) – In a significant development that could ease global economic anxieties, the United States and China announced on Monday that they have reached an agreement to substantially reduce tariffs levied on each other’s goods. This accord marks a potential turning point in the protracted trade war between the world’s two largest economies, a conflict that has rattled global markets and disrupted international supply chains.
The announcement followed a series of high-level talks held in Geneva, the first face-to-face meetings between senior US and Chinese economic officials since former President Donald Trump’s return to power. Trump’s administration had initiated a global tariff offensive, with China as a primary target, escalating trade tensions and prompting retaliatory measures.
Speaking to reporters after the negotiations, US Treasury Secretary Scott Bessent revealed that both sides had agreed to a 90-day pause on further tariff escalations. Crucially, Bessent stated that existing tariffs would be reduced by over 100 percentage points, bringing them down to a level of 10%.
“Both countries represented their national interests very well,” Bessent commented. “We both have an interest in balanced trade, the U.S. will continue moving towards that.”
Bessent appeared alongside U.S. Trade Representative Jamieson Greer, emphasizing the positive progress made during the weekend discussions. Both officials highlighted the narrowing of differences as a key achievement of the negotiations.
The agreement represents a marked shift from the escalating tariff dispute that has characterized US-China relations in recent years. Since assuming office in January, Trump had significantly increased tariffs on goods imported from China, adding to those imposed during his previous term and the duties that were already in place under the Biden administration. These actions had resulted in a 145% increase in tariffs paid by US importers on Chinese products.
China responded to the US tariff hikes with countermeasures of its own. Beijing imposed export restrictions on certain rare earth elements, critical components in the manufacture of weapons and electronic consumer goods in the United States. Additionally, China raised tariffs on US goods to 125%, further intensifying the trade war.
The tariff dispute had a significant impact on global trade flows, bringing nearly $600 billion in two-way trade to a standstill. This disruption led to concerns about stagflation, supply chain bottlenecks, and job losses in various sectors.
The news of the tariff reduction agreement was met with optimism in financial markets. Wall Street stock futures rose, and the dollar strengthened against safe-haven currencies as investors expressed hope that the deal would mitigate the risk of a global recession.
The agreement provides a temporary respite from the escalating trade tensions, offering a window for further negotiations to address underlying trade imbalances and other points of contention between the two countries. The 90-day pause on further tariff increases allows both sides to engage in more in-depth discussions and potentially reach a more comprehensive trade deal.
While the details of the agreement remain somewhat unclear, the commitment to significantly reduce tariffs is a positive sign. It suggests a willingness from both sides to de-escalate the trade war and work towards a more stable and balanced trade relationship. However, the long-term impact of the agreement will depend on the extent to which it addresses the fundamental issues that have fueled the trade dispute.
The tariff reduction deal is a significant step towards resolving the trade war between the United States and China. The agreement’s success will rely on sustained commitment from both sides to find common ground and foster a more cooperative economic relationship.
Financial markets are likely to remain sensitive to any developments in the trade negotiations, and further progress could provide additional support to investor confidence and global economic growth. The agreement offers hope that the world’s two largest economies can move beyond the trade war and build a more stable and mutually beneficial economic partnership.
