US and China Reach Deal to Temporarily Slash Tariffs

Source Credit : Reuters

The United States and China have reached an agreement to temporarily reduce reciprocal tariffs, a development that has exceeded expectations. This landmark deal comes as the world's two largest economies strive to resolve a protracted trade conflict that has heightened concerns of recession and unsettled financial markets.

On Monday, officials from both the United States and China announced a significant reduction in tariffs affecting bilateral trade. The U.S. will lower the additional tariffs on Chinese imports from 145% to 30%, while China will decrease its tariffs on U.S. imports from 125% to 10%. These new measures will take effect for a period of 90 days, marking a pivotal step in the ongoing trade relationship between the two nations.

The dollar strengthened, and stock markets experienced an uptick following recent news that alleviated concerns about a potential economic downturn. This downturn had been prompted last month by U.S. President Donald Trump's escalation of tariff measures designed to reduce the U.S. trade deficit.

"Both countries represented their national interest very well," U.S. Treasury Secretary Scott Bessent said after talks with Chinese officials in Geneva. "We both have an interest in balanced trade, the U.S. will continue moving towards that."

Adopting a conciliatory tone towards China, Bessent addressed the media alongside U.S. Trade Representative Jamieson Greer following the recent discussions in Switzerland. Both parties expressed optimism about the progress made in bridging their differences.

"The consensus from both delegations this weekend is neither side wants a decoupling," Bessent said. "And what had occurred with these very high tariffs ... was the equivalent of an embargo, and neither side wants that. We do want trade."

The tariff dispute has effectively halted nearly $600 billion in bilateral trade, disrupting supply chains and raising concerns about stagflation, while also leading to some workforce reductions.

The Geneva meetings marked the inaugural face-to-face discussions between senior economic officials from the United States and China since the return of former President Trump to power and the subsequent initiation of a comprehensive global tariff strategy, which notably included significant duties imposed on Chinese imports.

Bessent stated that the agreement does not encompass sector-specific tariffs. He emphasized that the United States will persist in its strategic rebalancing efforts in critical sectors such as pharmaceuticals, semiconductors, and steel, where supply chain vulnerabilities have been identified.

"This is better than I expected. I thought tariffs would be cut to somewhere around 50%," said Zhiwei Zhang, chief economist at Pinpoint Asset Management in Hong Kong. "Obviously, this is very positive news for economies in both countries and for the global economy, and makes investors much less concerned about the damage to global supply chains in the short term," Zhang added.