US and China agree to temporarily slash tariffs, boosting market confidence
Stock markets surged Monday as news broke that the United States and China had agreed to significantly roll back tariffs on each other’s goods for a 90-day period, easing tensions that have disrupted global trade and rattled economies.
The surprise deal, which follows high-level talks between the two largest economies in Geneva, saw both countries announce a 115 percentage point reduction in tariffs.
US Treasury Secretary Scott Bessent confirmed that the US would cut its tariffs on Chinese goods from 145% to 30%, while China would reduce its duties on US imports from 125% to 10%.
The deal, which will take effect on May 14, has given hope to investors who feared that escalating trade tensions could lead to a global recession.
While both sides hailed the deal as a step toward stability, analysts caution that the agreement is a temporary pause rather than a long-term resolution.
The tariff rollback comes after months of escalating trade hostilities, triggered by US President Donald Trump’s tariff measures aimed at narrowing the trade deficit with China.
In a joint statement, both the US and China emphasized the importance of continuing discussions to address the underlying issues, including intellectual property concerns, subsidies, and trade imbalances.
“Neither side wants decoupling,” Bessent said during a press conference in Geneva. “What had occurred with these very high tariffs was the equivalent of an embargo, and neither side wants that. We do want trade. We want more balanced trade.”
The announcement of the temporary tariff reductions sent stock markets soaring. US stock futures jumped, with the Dow, S&P 500, and Nasdaq all experiencing significant gains.
In Europe, indices such as the DAX and CAC 40 also rose, reflecting optimism about the deal’s potential to mitigate the economic damage caused by the trade conflict.
The agreement also boosted shares of shipping companies, with Maersk and Hapag-Lloyd both seeing large increases in their stock prices.
As trade between the US and China had slowed due to the high tariffs, the deal provides relief for industries reliant on stable trade flows.
The trade war has had a pronounced effect on both economies. US GDP showed signs of contraction in the first quarter of 2025, as tariffs impacted consumer spending and supply chains.
Meanwhile, China’s manufacturing sector has struggled, with factory activity contracting at its fastest pace in over a year. Exports to the US have also fallen sharply, prompting Beijing to introduce stimulus measures.
While the tariff reductions are a positive development, analysts remain cautious. “This is just the start of a broader and more comprehensive set of negotiations,” said Dan Ives, Managing Director at Wedbush Securities.
“We expect both these tariff numbers to move down markedly over the coming months as deal talks progress.”
The two sides have agreed to establish a mechanism for ongoing dialogue, with US Treasury Secretary Bessent and Chinese Vice Premier He Lifeng overseeing the next rounds of negotiations.
The goal, according to the joint statement, is to resolve trade differences and foster deeper cooperation.
However, as Nikos Tzabouras, Senior Market Analyst at Tradu.com, pointed out, while the deal may ease short-term fears, the uncertainty surrounding the US-China trade relationship is far from over.
“The relief may prove short-lived,” Tzabouras said. “The agreement represents a temporary pause, not a comprehensive resolution. Further negotiations are likely to be more complex.”
The agreement also leaves in place several contentious tariffs, including a 20% levy on Chinese goods related to the fentanyl trade, which was introduced earlier this year.
These measures, coupled with tariffs on agricultural products and other strategic goods, suggest that the road to a more permanent trade deal may still be long and challenging.
The trade war between the US and China has been one of the most significant economic disputes of recent years, with both sides levying tariffs on hundreds of billions of dollars’ worth of goods.
While the 90-day reprieve is a welcome development, the broader trade tensions and underlying economic issues remain unresolved.
For now, however, the temporary tariff reductions offer a glimmer of hope for businesses and markets already under strain. As the two sides continue talks, all eyes will be on the next steps in this ongoing trade saga.