The US and China took a step on Monday to temporarily agree to ease the trade war between the two biggest economies of the world Reduce the punishing tariffs they imposed on each other.
The US move marked the approval of the costs of a full trade war with China after President Trump repeatedly declared that he would not lower tariffs without concessions from China. Despite the intense White House, the Trump administration has finally retreated from its steepest tariffs and agreed to hold more formal consultations with Beijing after businesses and consumers began to show signs of economic tension.
Trump explained that many of the tariffs he imposed remained intact, and said he was partially focused at the White House Monday on Monday on “opening up” China to American businesses. He was hoping to talk to Chinese President Xi Jinping later this week, but said on paper it would take some time to win the full amount.
“We're not trying to hurt China,” Trump said.
In a joint statement released earlier that day, the US and China said they would suspend their respective tariffs for 90 days and continue negotiations that began this weekend. Under the contract, the US will reduce tariffs on Chinese imports from 145% to 30%, and China will reduce import tax on American goods from 125% to 10%.
The outcome of the crazy negotiations brought tariff rates to where they were before Trump praised them on April 2nd, calling them “The Day of Liberation.” However, the talks did not appear to bring any meaningful concessions beyond the agreement to continue the discussion.
“We concluded that we have a common interest,” said Scott Bescent, a Treasury Department, at a press conference in Geneva that we and Chinese officials met over the weekend. “The consensus from both delegations is that neither side wants decoupling,” he said.
China said it would suspend or cancel measures adopted in retaliation against tariff escalation. In early April, the Chinese government ordered restrictions on exports of key components of automobiles, planes, semiconductors, rare earth metals and magnets.
Becent said the two countries may discuss deals with China to buy more American products. Such transactions could help narrow the US trade deficit with China.
The agreement breaks a deadlock that has halted many trade between China and the US. Many American companies suspend the order and hoped that both countries could enter into contracts to lower tariff rates.
Bescent denounced the Biden administration for failing to respect the commitment Trump had reached with China during his first term. He said the current round of consultations would aim for a more “full-sum agreement.”
Chinese factories have experienced a sharp decline in export orders to the US, putting even more pressure on the low economy. Chinese producers were trying to expand trade to Southeast Asia and other regions to avoid US tariffs.
Becent said the tariffs effectively caused something that neither side wanted. The two countries said Mr Bescent will be involved in the ongoing negotiations. Jamieson Greer, US Trade Representative. And he was Lifeng, the deputy prime minister of China's economic policy, leading the weekend consultations with the Chinese.
In the research notes, Mark Williams, president of Asian Economics in Capital Economics, said the agreement was “another major setback from the Trump administration's aggressive stance.” He also said there is no guarantee that a 90-day ceasefire will give way to a permanent agreement, especially if the US continues to rally other countries to limit trade with China.
The temporary reprieve from surprisingly high tariffs could be the cause of celebrations for businesses in both countries, but the impact remains. As businesses compete to schedule shipments during the 90-day negotiation window, companies encounter potential demand, leading to rising transportation prices.
The global stock market jumped to the announcement. Hong Kong's benchmark index spiked 3%, roughly the same amount as New York's S&P 500.
Zhiwei Zhang, president and chief economist at Hong Kong investment firm PinPoint Asset Management, called the deal a “good starting point” for both countries.
“From a China perspective, the results of this conference have been successful. China has taken a tough stance on the US threat of high tariffs and was able to ultimately lower the tariffs significantly without making any concessions,” he said.
Bescent and Greer said the two countries are having substantive discussions about the US demands. Becent said that Chinese “understand” the magnitude of the US fentanyl crisis, and that there is a “positive path to move forward.”
Trump initially accused China of imposing a 20% tariff on exports and not doing enough to stop the fentanyl flow to the United States. That punitive tariff remains, along with the 10% “baseline” tariffs imposed on China and almost all other US trading partners.
Towards the end of Trump's first term, the average US tariff on Chinese goods across the Biden administration was about 19%, which was applied to about two-thirds of imports from China, according to the Institute for International Economics. The tariffs imposed during Trump's second term were applied to all imports from China.
The Trump administration has accused China of unfairly subsidizing key sectors of its economy and flooding the world with cheap goods. Trump says China has “breaked away” the United States for decades with unfair trade practices that have destroyed the US manufacturing sector and sacrificed the country's work.
Wang Wen, dean of the Institute of Financial Studies at Lenmin University in Beijing, said the agreement demonstrated that both countries hope to avoid “worst-case scenarios.” He said China was “better” to deal with the tempo and style of first President Trump.
When building the contract, Becent and Greer were careful not to oppose China. Instead, they placed most of the responsibility for the trade war with the Biden administration and accused them of ignoring trade imbalances.
Becent suggests that both countries can help each other by balancing their economies, saying that China can reduce overproduction while the US can recover its manufacturing industry.
Both sides have been sparring publicly in recent weeks. The White House repeatedly said it was talking to Chinese officials, but Beijing denied that such talks were taking place.
Beijing initially struggled with Trump's punitive tariffs. Last month, Mao Zedong, a spokesman for China's Senior Foreign Ministry, posted a video of Mao Zedong's speech during the Korean War on X. In China, it is known as a war that resists US invasions and supports South Korea.
China has carefully framed its involvement in Geneva's negotiations, not as a concession to Trump's tariffs, but as a necessary step to avoid further escalation. China's Ministry of Commerce said the agreement was “in the interests of both countries and the common interests of the world.”
Since the tariffs were announced, China has stopped importing sorghum, poultry and bone meal from American companies, adding 27 companies to its list of companies facing trade restrictions.
Several Chinese agencies, including the Commerce and the State Department, met on Monday to discuss ways to strengthen strategic mineral export controls, even if China agreed to roll back punitive measures it imposed over the past month.
In a statement, China's European Chamber of Commerce said it was “encouraged” by the announcement, but said “uncertainty remains” as tariffs are only temporarily suspended.
“We hope that both sides will continue to engage in dialogue to resolve differences and not take measures that will disrupt global trade and cause collateral damage to those caught in crossfire,” said Jens Eskelund, president of the European Chamber of Commerce.
Nick Cumming Blues Contributed with a report from Geneva, Christopher Buckley From Taipei, and Alan Rappyport and Anna Swanson From Washington.
