The United States and China said they have agreed a deal to slash reciprocal tariffs as Washington and Beijing seek to end a trade war that has disrupted the global economy and set financial markets on edge.
Reuters
The United States and China have announced that they will roll back tariffs on each other’s goods for at least 90 days, the latest abrupt retreat in U.S. President Donald Trump’s global trade war.
The sudden breakthrough, announced Monday after talks in Geneva over the weekend, follows months of the world’s two largest economies ratcheting up economic tensions ever since Mr. Trump returned to office and imposed tariffs on Washington’s allies and rivals alike. It also comes amid mounting fears that U.S. consumers would soon face rising inflation and supply shortages as the tariffs made imported goods from China prohibitively expensive.
In a rare joint statement, the two governments said U.S. tariffs on Chinese goods would be reduced from 145 per cent to 30 per cent, while China would cut its levies on U.S. imports from 125 per cent to 10 per cent. The reductions will take effect Wednesday and last “for an initial period of 90 days.”
“After taking the aforementioned actions, the parties will establish a mechanism to continue discussions about economic and trade relations,” the joint statement said, adding this dialogue would be led by Chinese Vice-Premier He Lifeng, U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer.
U.S. Treasury Secretary Scott Bessent, right, and U.S. Trade Representative Jamieson Greer hold a news conference in Geneva, on May 12.FABRICE COFFRINI/AFP/Getty Images
Speaking at the White House, Mr. Trump heralded the agreement as “a total reset with China” and said he was confident Beijing would also reduce non-tariff trade barriers, leading to an “opening up” of the country.
“I think it’s going to be fantastic for China. I think it’s going to be fantastic for us. And I think it’s going to be great for unification and peace,” he said.
If the two sides don’t strike a deal in 90 days, Mr. Trump said, he will reimpose “substantially higher” tariffs but will not return to the previously high level because, “at 145, you’re really decoupling, because nobody is going to buy.”
The about-face followed increasing pressure on the White House over looming shortages of consumer goods. Much of the country’s supply of children’s toys, for instance, comes from China, and as existing inventories sold off, companies warned there would be empty shelves by Christmas.
The President himself acknowledged this reality last week but insisted some economic pain was worth it to stop the U.S. from importing so many foreign goods. Children “don’t need to have 250 pencils. They can have five,” he said in an NBC interview.
Still, he insisted Monday that he would not negotiate on some tariffs, including the 25-per-cent levy on steel, aluminum and finished cars, which apply to all countries.
“We’re not even talking about that,” the President said. “We’re bringing the car business back into this country.” He said automakers are leaving Canada and Mexico, an apparent reference to plants in those countries that have cut production since he announced his levies.
“The tariffs have been amazing,” Mr. Trump said.
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Speaking in Geneva, Mr. Bessent said, “We both have an interest in balanced trade – the U.S. will continue moving toward that.”
“We have a very good mechanism to avoid unfortunate escalations happening again,” he said, adding that the “consensus from both delegations is that neither side wanted a decoupling.”
Both economies have begun to feel the strain of reduced exports and severely higher prices as a result of reciprocal tariffs, and concerns over disruption to the bilateral relationship have contributed to chaos in the U.S. stock and treasury markets.
Facing growing criticism, Mr. Trump last month said he was open to a trade deal, which he said could happen “pretty quickly,” promising not to “play hardball” during negotiations with China.
“They’re gonna do very well, and I think they’re going to be happy, and we’re gonna live together very happily and ideally work together,” he said.
Trump announces 90-day pause on steep global tariffs, hikes China levy to 145%
Monday’s announcement is the second major rollback of tariffs championed by Mr. Trump, emblematic of an economic policy that has caused turmoil in the markets.
On April 2, Mr. Trump announced a raft of “Liberation Day” tariffs against almost every country in the world, with levies apparently based on a country’s trade surplus with the U.S., though those with a trade deficit – and even uninhabited territories – were not spared.
After markets plummeted and a global recession loomed, Mr. Trump backtracked, announcing a 90-day pause, which is still in effect. He has since been negotiating individual trade deals, the most comprehensive struck last week with Britain.
Speaking to reporters Friday, Mr. Trump dismissed criticism of his approach.
“I think the tariffs are going to be the greatest thing we’ve ever done as a country,” he said. “It’s going to make our country rich again.”
The President has also rolled out more targeted tariff relief, including measures meant to help U.S. automakers who import parts from other countries.
Despite his numerous rollbacks, Mr. Trump has insisted he will stick to at least some of his levies.
Despite the agreement with Britain, for instance, he is leaving in place a 10-per-cent “baseline” tariff on the country. And during a White House meeting last week with Mark Carney, Mr. Trump said there was nothing the Prime Minister could say that would change his mind about tariffs currently hitting Canada. The President also mused about potentially doing away entirely with the United States-Mexico-Canada Agreement that governs free trade on the continent.
With files from Alexandra Li in Beijing and Reuters