GENEVA, May 12 (Reuters) – In a significant move toward de-escalating trade tensions, the United States and China announced on Monday a groundbreaking agreement to temporarily reduce tariffs. This decision marks a potential turning point in the ongoing trade war between the world’s two largest economies, which has rocked global markets and disrupted international economic stability.
Following discussions with Chinese officials in Geneva, U.S. Treasury Secretary Scott Bessent confirmed that both nations had agreed to a 90-day suspension of certain trade measures, leading to a reduction of tariffs by more than 100 percentage points, down to 10%. The agreement comes as a relief to financial markets, which have been under pressure due to the uncertainty surrounding the trade conflict.
“Both sides have represented their national interests effectively,” Bessent remarked during a press conference. “We both want to ensure balanced trade, and the U.S. is committed to moving toward that goal.”
Bessent, joined by U.S. Trade Representative Jamieson Greer, emphasized that the talks, which took place over the weekend, had made significant strides in narrowing the differences between the two nations. This marked the first direct negotiations between high-ranking U.S. and Chinese economic officials since the return of President Donald Trump to power, a period during which the U.S. launched an aggressive tariff strategy, particularly targeting China.
Under Trump’s administration, tariffs on Chinese goods had been significantly increased. In January, the U.S. raised tariffs on a wide array of Chinese imports to a staggering 145%, a sharp rise from the earlier rates, which were also substantial. These measures came on top of the duties imposed during Trump’s first term and those enforced by the Biden administration. In retaliation, China introduced export restrictions on essential rare earth elements, critical for U.S. manufacturers of both military and consumer electronic goods. Additionally, Beijing raised tariffs on U.S. products to 125%, further escalating the trade standoff.
The escalating tariff dispute resulted in a near-freeze of nearly $600 billion in two-way trade, bringing supply chains to a halt, intensifying fears of stagflation, and even prompting some companies to lay off workers. The prolonged trade war has been a major source of economic unease, with the global economy reeling under the weight of tariffs and countermeasures.
Financial markets, ever sensitive to geopolitical developments, had been closely monitoring the situation for signs of a potential resolution. The announcement of the tariff reduction sparked optimism, with U.S. stock futures rising and the dollar gaining ground against other safe-haven currencies. Investors expressed renewed hope that a full-blown global recession could be avoided, thanks to the reduction in trade barriers.
While the suspension of tariffs offers a temporary reprieve, experts remain cautious. The agreed-upon 90-day window allows both sides time to negotiate further, but it does not guarantee a permanent solution. The future of U.S.-China trade relations will likely depend on further discussions aimed at resolving the deeper structural issues that have underpinned the trade war.
Despite the positive tone in Geneva, the agreement highlights the delicate nature of U.S.-China relations, where progress on one front may be met with new challenges elsewhere. For instance, the issue of intellectual property theft, long a point of contention between the two nations, is expected to remain a key sticking point in future negotiations. Additionally, both countries face mounting domestic pressures, which may influence their willingness to make further compromises.
The Geneva meetings, though heralded as a diplomatic victory, are just one step in what will likely be a protracted and complex process of rebuilding trade ties between the U.S. and China. The 90-day pause on tariffs offers a window of opportunity for more comprehensive talks, but the challenges ahead should not be underestimated.
