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US and China Slash Tariffs in 90-Day Trade War Pause

May 12, 2025

The United States and China have agreed to temporarily reduce reciprocal tariffs for 90 days, with the US cutting duties on Chinese goods from 145% to 30% and China lowering tariffs on US imports from 125% to 10%. The agreement, reached during weekend negotiations in Geneva, has sparked a global market rally while providing relief to businesses and consumers facing supply chain disruptions and potential price increases from the nearly $600 billion trade relationship that had effectively halted.

The Agreement

After intensive weekend talks in Geneva between US Treasury Secretary Scott Bessent, US Trade Representative Jamieson Greer and their Chinese counterparts, both nations announced significant reductions in their punitive tariffs. The deal represents a major de-escalation in the trade conflict that erupted after President Trump's "Liberation Day" announcement on April 2, which placed a 10% tariff on virtually all goods entering the US, with significantly higher rates on Chinese products.

According to a joint statement, both countries recognized "the importance of a sustainable, long-term, and mutually beneficial economic and trade relationship" and established a mechanism to continue discussions during the 90-day period.

Beyond tariff reductions, China agreed to suspend non-tariff countermeasures imposed since April 2, including export restrictions on rare-earth minerals and removing US companies from regulatory blacklists. However, the US will maintain its 20% fentanyl-related tariffs on China that were imposed in February.

Market Response

Financial markets responded enthusiastically to the announcement, with US stock futures rising nearly 3% and the Dow jumping more than 1,000 points (2.5%). Asian markets also moved higher, while safe-haven assets like gold declined as recession fears eased.

Treasury Secretary Bessent characterized the deal as a "pause" rather than a major policy shift, saying: "This is just a pause. The April 2 tariff level for China was 34%, so we have moved that down from 34% to 10%." He also emphasized that "both countries represented their national interest very well. We both have an interest in balanced trade, the U.S. will continue moving towards that."

Impact & Analysis

For American consumers and businesses, the agreement provides immediate relief from potential price increases on countless Chinese-made goods that would have resulted from the 145% tariffs. However, with duties remaining at 30% - substantially higher than pre-trade war levels - prices will likely still be elevated compared to earlier years.

The US Census Bureau data shows the tariff war had effectively halted the nearly $600 billion in two-way trade between the world's two largest economies, disrupting global supply chains. US manufacturers will continue facing pressure from the administration's strategic goal of reshoring production while contending with higher input costs from the remaining tariffs.

For China, the agreement offers crucial economic relief. According to Goldman Sachs analysis, China's economy has been struggling with exports to the US falling sharply, factory activity contracting at its fastest pace in 16 months in April, and ongoing housing and debt crises. The renewed access to US markets provides a lifeline to Chinese manufacturers and exporters.

Bessent noted that strategic decoupling remains a goal in certain sectors, stating: "What we do want is a decoupling for strategic necessities, which we were unable to obtain during Covid. And we realized that efficient supply chains were not resilient supply chains. So, we are going to create our own."

What's Next

Negotiators from both countries will use the 90-day window to address deeper structural issues in their trade relationship and potentially negotiate a more comprehensive agreement. The breakthrough comes as part of broader Trump administration diplomatic initiatives including a US-UK trade deal, talks with Iran, and potential negotiations between Ukraine and Russia.


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