This week the United States and China struck a very important deal. To further grease the wheels on trade, they’ll lower reciprocal tariffs for 90 days. This agreement, signed in Geneva, aims to lower trade frictions between the two global heavyweights. It makes it easier for businesses to operate by ensuring less administrative burden.
As a result, the United States will be suspending the steep 145% tariff on any goods brought in from mainland China. This decision coincides with a newly brokered deal. This tariff will be gradually lowered to only 30%, offering some relief for Chinese exporters and possibly helping American consumers by lowering their costs. In response, Beijing has agreed to pause its own 125% tax on U.S. goods, reducing it to a more manageable 10%.
The announcement that the tariffs will be lowered is a surprise as the two countries continue to negotiate over trade between the countries. Both governments are looking to make this temporary measure create an atmosphere to further negotiations.
This deal does have one major caveat. Yet it fails to address one of the biggest gamechangers recently made by the United States — the raising of the “de minimis” exemption. Until now, this exemption allowed for imports worth less than $800 to come into the U.S. tariff-free. The elimination of this exemption has raised alarms among both small businesses and consumers alike. They might find themselves suddenly hit with unforeseen expenses on lower-value imports.
The 2-year rollback in tariffs is an uncharacteristically modest but welcome step towards long-term reconciliation of trade relations between the U.S. and China. Economists and trade analysts are closely watching the impact of these developments. Specifically, they’re interested in how these changes will affect market competition and consumer choice in both countries.
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