US and China reach a deal on tariffs, with a 90-day pause

The United States and China agreed Monday to slash their massive recent tariffs, restarting stalled trade between the world’s two biggest economies and setting off a rally in global financial markets.

But the de-escalation in the US trade wars did nothing to resolve underlying differences between Beijing and Washington.

The deal lasts 90 days, creating time for US and Chinese negotiators to reach a more substantive agreement. But the pause also leaves tariffs higher than before Trump started ramping them up last month. And businesses and investors must contend with uncertainty about whether the truce will last.

US Trade Representative Jamieson Greer said the US agreed to drop the 145 per cent tax Trump imposed last month to 30 per cent. China agreed to lower its tariff rate on US goods to 10 per cent from 125 per cent.

Greer and US Treasury Secretary Scott Bessent announced the tariff reductions at a news conference in Geneva.

The officials struck a positive tone as they said the two sides had set up consultations to continue discussing their trade issues. Bessent said that the triple-digit tariffs the two countries imposed on each other last month – in an escalation of tensions started by US President Donald Trump – amounted to “the equivalent of an embargo, and neither side wants that. We do want trade”.

The delegations, escorted around town and guarded by scores of Swiss police, met for at least a dozen hours on both days of the weekend at a sun-baked 18th-century villa that serves as the official residence of the Swiss ambassador to the United Nations in Geneva.

At times, the delegation leaders broke away from their staffs and settled into sofas on the villa’s patios overlooking Lake Geneva, helping deepen personal ties in the effort to reach a much-sought deal.

The 30 per cent levy that America is now imposing on Chinese goods includes an existing 20 per cent tariff intended to pressure China into doing more to prevent the synthetic opioid fentanyl from entering the United States. It also includes the same 10 per cent “baseline” tariff the US has slapped on imports from most of the world’s countries. The 30 per cent tax comes on top of other levies on China, including some left over from Trump’s first term and kept by former President Joe Biden.

China’s Commerce Ministry called the agreement an important step for the resolution of the two countries’ differences and said it lays the foundation for further cooperation.

“This initiative aligns with the expectations of producers and consumers in both countries and serves the interests of both nations as well as the common interests of the world,” a ministry statement said.

China hopes the US will stop “the erroneous practice of unilateral tariff hikes” and work with it to safeguard the development of economic and trade relations, injecting more certainty and stability into the global economy, the ministry said.

The joint statement by the two countries said China also agreed to suspend or remove other measures it has taken since April 2 in response to the US tariffs. China has increased export controls on rare earths, including some critical to the defence industry, and added more American companies to its export control and unreliable entity lists, restricting their business with and in China.

The full impact on the complicated tariffs and other trade penalties enacted by Washington and Beijing remains unclear. And much depends on whether they will find ways to bridge long-standing differences during the 90-day suspension.

“This is a substantial de-escalation,” said Mark Williams, chief Asia economist at Capital Economics. But he warned that “there is no guarantee that the 90-day truce will give way to a lasting ceasefire”.

Dani Rodrik, an economist at Harvard University, said that the two countries had stepped back “from a needless trade war” but that US tariffs on China remained high at 30 per cent “and will mainly hurt US consumers”.

“Trump has obtained absolutely nothing from China for all the chaos he generated. Zilch,’’ Rodrik wrote in a posting on Bluesky.

AP