The United States and China have reached a temporary trade agreement, announcing a 90-day reduction in tariffs on each other’s imports.
The move comes after two days of intense negotiations in Geneva, Switzerland, marking the first major breakthrough since tensions escalated under President Donald Trump’s aggressive trade policies.
Under the revised tariff structure, U.S. tariffs on Chinese imports will drop from 145% to 30% by May 14, including those tied to fentanyl-related trade measures.
Chinese tariffs on U.S. goods will also be reduced from 125% to 10%, signaling an effort to restore economic stability between the world’s two largest economies.
The agreement aims to de-escalate trade hostilities and provide both nations with additional time to negotiate long-term trade solutions while reducing immediate financial strain on businesses and consumers.
Diplomatic Shift and Market Reactions
The breakthrough follows previous rounds of trade talks, where officials expressed cautious optimism about resolving disputes. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer, who led the U.S. delegation, described the discussions as “productive” and “constructive.”
“We are in agreement that neither side wants to decouple,” Bessent stated. He added that discussions on fentanyl regulations and trade agreements with China were robust and might lead to purchasing commitments from Beijing.
Markets reacted positively, with Asian and European stock indices climbing and U.S. futures hitting session highs. Additionally, oil prices and Treasury yields rose, while the offshore yuan appreciated by 0.5% against the dollar following the announcement.
Broader Trade War Context
The U.S.-China trade war has been an ongoing issue, exacerbated by Trump’s “Liberation Day” tariff policies, which introduced 145% duties on Chinese imports, followed by China’s 125% retaliatory levies on American goods.
These tariffs have significantly disrupted trade flows, with annual two-way trade previously exceeding $660 billion. Industries across both nations warned of rising costs, supply chain disruptions, and economic instability, prompting calls for a negotiated settlement.
The U.S. had previously pushed for more balanced trade relations, a stance Greer reinforced during the talks.
“Our Chinese counterparts clearly came to deal this week,” he noted, signaling potential willingness from Beijing to engage in long-term economic cooperation.
Historical Precedents and Remaining Uncertainties
Despite the temporary tariff reductions, experts warn that lasting agreements could take longer to materialize. In 2018, similar de-escalation efforts failed to produce meaningful results, leading to continued tariffs and trade tensions until the “Phase One” deal in January 2020.
China had struggled to meet its commitments under that agreement, with the U.S. trade deficit surging during the pandemic, setting up the latest round of economic disputes between Washington and Beijing.
While markets welcome signs of progress, many observers remain cautious, waiting to see whether this 90-day tariff reduction translates into a more comprehensive trade resolution or merely stalls another escalation.
What you should know
With additional details expected in official briefings this week, analysts will closely monitor:
- Potential trade concessions by China on critical exports such as fentanyl-related products.
- Whether Trump remains open to further tariff reductions beyond the 90-day agreement.
- Long-term regulatory frameworks are aimed at stabilizing trade and investment flows between the two nations.
The U.S. and China will continue discussions through a newly established “trade consultation mechanism,” offering hope for more structured economic diplomacy moving forward.
