In a significant breakthrough, the United States and China have agreed to reduce the import tariffs they imposed on each other, marking a pivotal de-escalation in their ongoing trade war.
The deal, brokered after high-level talks in Switzerland, comes as both nations seek to avoid further economic turmoil.
According to US Treasury Secretary Scott Bessent, both countries have agreed to cut tariffs by 115% for a 90-day period.
This move is a direct response to the escalating tension after President Donald Trump’s imposition of steep tariffs on Chinese imports in recent months, a decision that had sent shockwaves through financial markets and raised concerns about a global recession.
The trade conflict intensified last month when President Trump announced a universal baseline tariff on all imports to the US, which he dubbed “Liberation Day.” Around 60 trading partners, including China, faced higher tariffs as a result. In retaliation, China imposed its own tariffs, with both sides locking in a dangerous cycle of punitive levies. At one point, the US imposed a 145% tariff on Chinese goods, while China retaliated with a 125% tariff on certain US imports.
Under the new agreement, the US will reduce tariffs on Chinese imports to 30%, while China will cut tariffs on US goods to 10%. This reduction marks a significant shift, as it includes the suspension of most Liberation Day tariffs for 90 days, starting on May 14. However, a 20% component remains in place to apply pressure on China regarding its role in the fentanyl trade.
The news of the deal brought a wave of optimism to the markets. Shares surged globally, with Hong Kong’s Hang Seng Index closing 3% higher, and China’s Shanghai Composite rising 0.8%. In Europe and the US, stock indices also rose sharply, with shipping companies—particularly Maersk and Hapag-Lloyd—seeing substantial gains.
Maersk, in particular, expressed hope that this agreement would lead to a more stable, long-term trade environment, providing much-needed predictability for businesses. Despite this optimism, the gold price, which had been benefiting from its safe-haven status, fell 3% to $3,224.34 an ounce following the announcement.
In a joint statement, both countries underscored their commitment to resolving their economic differences. The agreement establishes a new mechanism for continued dialogue, led by Treasury Secretary Bessent and China’s Vice Premier He Lifeng.
The goal is to address key issues, including concerns over intellectual property, subsidies, and technology transfers, which have long been points of contention between the two economic giants.
Despite the thawing of tensions, the underlying issues of the trade relationship remain. President Trump has long criticized the trade deficit with China, while American companies continue to raise concerns over forced technology transfers and intellectual property theft.
Meanwhile, economists have warned that these tariffs could negatively affect global growth, with the International Monetary Fund (IMF) revising its global growth forecast to 2.8% from 3.3% for the year, citing the impact of the trade uncertainty.
While this agreement marks a significant step toward easing trade tensions, the ultimate resolution of the trade dispute will likely depend on continued negotiations and a long-term commitment to fairer trade practices.
