The U.S. and China, the world’s two largest economies, have agreed to a deal that will see both parties agree to reduce tariffs on each other’s goods for 90 days, following negotiations in Geneva. This move marks a significant de-escalation in a trade conflict that has disrupted global markets and supply chains and threatened economic growth worldwide.
The Specifics
Starting on May 14th, 2025, the U.S. will reduce its tariffs on imports from China from a staggering 145% to 30%. Simultaneously, China will reduce its tariffs on U.S. products from 125% down to 10%. During this 90-day truce, both countries agree not to impose any new tariffs.
China will also suspend the various non-tariff measures it put in place in April, including the restraining of exports of rare earth elements and regulatory actions against U.S. firms.
The Next Steps
The agreement is designed to allow for further technical discussions, with working groups led by U.S. Treasury Secretary Scott Bessent, U.S. Trade Representative Jamieson Greer, and Chinese Vice Premier He Lifeng. These talks aim to address broader issues, including market access, non-tariff barriers, state subsidies, and intellectual property rights, but no timeline for subsequent negotiations has been set.
Market Reactions
The announcement triggered a surge in global stock markets. The S&P 500 and the Nasdaq on Wall Street saw their biggest gains in months while Asian and European markets rallied, too. Stakeholders of the companies that depend on the U.S.-China trade, especially in the manufacturing, electronics, and consumer goods sectors, found their share prices advancing as investors took the view that that there will be lower input costs and supply chain stability at a global scale.
Shipping firms and logistics providers that had seen their trade volumes between the U.S. and China drop considerably because of the tariff war will also gain from the truce. The lowering of tariffs and the halt of non-tariff barriers should help reduce compliance risks and operational bottlenecks, at least temporarily.
There are still ongoing risks, problems, and uncertainties to deal with.
Even though markets reacted positively, the deal is limited in both scope and duration, as it doesn’t deal with the root cause of the trade war, such as the U.S. trade deficit with China, state subsidies, and intellectual property disputes. For companies, the temporary tariff cut provides a relief by reducing costs and uncertainty in the near term. But, the 90-day window means that firms will have to stay agile, as tariffs could come back or change.
The longer-term outlook for this suspension remains uncertain. In the next few months, both sides will benefit from seeking to negotiate more effectively and further resolve trade issues in the future.