In a landmark decision, the United States and China have agreed to suspend most tariffs on each other’s goods for 90 days. This temporary measure marks a significant thaw in trade tensions between the world’s two largest economies.
The agreement, reached after high-stakes talks in Lake Geneva, Switzerland, will see “reciprocal” tariffs between the two nations reduced dramatically, from 125% to just 10%. However, the U.S. will maintain a 20% duty on Chinese imports related to fentanyl, leaving total tariffs on Chinese goods at 30%.
A Positive Step Forward
“We had very productive talks, and I believe that the venue here in Lake Geneva added great equanimity to what was a very positive process,” said U.S. Treasury Secretary Scott Bessent at a news conference following the discussions.
The breakthrough came after months of escalating trade tensions. Since returning to the White House in January, President Donald Trump has implemented aggressive trade measures, including tariffs as high as 145% on Chinese imports. Beijing responded with retaliatory restrictions, escalating fears of a global economic slowdown.
The new deal signifies a “substantial de-escalation,” according to Mark Williams, Chief Asia Economist at Capital Economics. He noted, however, that the U.S. still imposes higher tariffs on China compared to other nations, and challenges remain in reaching a long-term solution.
Market Reactions
News of the tariff reductions sent global markets soaring. In the U.S., Nasdaq futures jumped 3.7%, while the S&P 500 and Dow futures climbed 2.7% and 840 points respectively.
The rally extended beyond equities. The ICE U.S. Dollar Index rose by 1.1%, and oil prices surged. Brent crude futures gained 2.7%, trading at $65.66 per barrel, while U.S. West Texas Intermediate crude was up 2.9% at $62.81 per barrel.
European markets also joined the rally, with the pan-European Stoxx 600 index up 1% during mid-morning trading.
Challenges Ahead
While the 90-day truce is a significant step forward, experts warn it may not be enough to resolve the deeper issues between the two nations.
Tai Hui, APAC Chief Market Strategist at J.P. Morgan Asset Management, called the tariff reduction “larger than expected” and said it reflected a mutual acknowledgment of the economic damage caused by the trade war. However, he cautioned that the short timeframe might not allow for the resolution of more complex trade disputes.
“The 90-day period may not be sufficient for the two sides to reach a detailed agreement, but it keeps the pressure on the negotiation process,” Hui added.
One unresolved issue is China’s restrictions on rare earth exports, a critical topic for industries dependent on these resources. Investors are eagerly awaiting further details on whether Beijing will relax these curbs as part of ongoing talks.
Looking Ahead
Both the U.S. and China have committed to continuing discussions on economic and trade policy over the next three months. The pause in tariffs officially begins on Wednesday, giving both sides time to work toward a more comprehensive trade agreement.
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