In a stunning turnaround on US-China trade relations, the United States intends to reduce China tariffs from an average of 145% down to 30% by May 14. At the same time, China will reduce its own tariffs on US imports from 125% to 10%. Both countries agreed to observe these deep cuts for a period of 90 days. This decision is an important step in the direction of reducing the bitter bilateral trade disputes that have persisted.
The agreement emerged after two days of discussions between US and Chinese officials in Geneva, where they explored ways to stabilize and improve economic relations. US Treasury Secretary Scott Bessent cautioned that tariff levels this high would effectively shut down trade entirely between the two countries. He shared the urgent importance of keeping communication flowing.
Bessent is now preparing for further negotiations, including with He Lifeng, Vice Premier of the State Council. In the economic and trade realms, they want to establish a regularized mechanism where strong and sustained bilateral discussion and engagement can take place. This is, in part, to avoid a decoupling that neither the states nor the operators want to see.
“The consensus from both delegations this weekend is neither side wants a decoupling.” – Scott Bessent
These recent tariff increases come on the heels of increased trade war tensions that began in earnest earlier this spring. In February, US president Donald Trump imposed a 10% tariff on imports from China. By April, Trump had escalated taxes on Chinese goods to an unprecedented 145%, significantly impacting various industries reliant on Chinese imports.
China’s role in supplying the vast majority of America’s consumer goods makes it a country of great importance to the United States. For example, it makes 97% of the baby carriages that US import. It produces 96% of all artificial flowers and umbrellas, 95% of fireworks, 93% of children’s coloring books, and 90% of combs. Those high tariffs threatened to upend these supply chains in a major way.
“And what had occurred with these very high tariff … was an embargo, the equivalent of an embargo. And neither side wants that. We do want trade. We want more balanced trade. And I think that both sides are committed to achieving that.” – Scott Bessent
Industry experts have breathed a sigh of relief at the turn of events. John Gong noted that “the companies involved in this trade on both sides just cannot afford waiting anymore.” Her sentiment is echoed across the country by the businesses who have urgently been trying to make sense of the complicated world of international trade.
Louise Loo, an S&P commodity analyst, mentioned that China, in all fairness, can quickly replace its buyers. In comparison, American businesses will have a hard time finding new suppliers as they wait for the ease of manufacturing in China.
Investors reacted positively to the news, with Lindsay James stating, “This news is undoubtedly better than investors had hoped.” She reiterated that leading into those negotiations, President Trump said an 80% tariff rate “sounds pretty good.” As with all things, there were conflicting reports suggesting that a 60% just might be the more feasible target.
So the decrease in tariffs comes as a welcome ray of light for both economies. It advances the cause of fairer and more balanced trade relations. Obstacles remain, however both international locations are dedicated to reinforcing interplay and discussion to continue to grow cooperation. This further demonstrates their eagerness to stop the escalation in trade conflicts.
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