After the first meetings between Washington and Beijing since Trump ratcheted up his trade war, the world's two biggest economies agreed in a joint statement to bring their triple-digit tariffs down to two figures and continue negotiations.
The announcement sent financial markets soaring after weeks of turmoil over tariff fears. Major Wall Street indexes surged, with the broad-based S&P 500 closing 3.3 percent higher.
"Yesterday we achieved a total reset with China after productive talks in Geneva," Trump said. "I'll speak to President Xi, maybe at the end of the week."
US Treasury Secretary Scott Bessent described weekend discussions with Chinese Vice Premier He Lifeng and international trade representative Li Chenggang as "productive" and "robust" with both sides anticipated to meet again soon.
Trump's fresh duties on many imports from China came up to 145 percent this year, compared to 10 percent for other countries in a global tariff blitz launched last month.
Beijing hit back with duties of 125 percent on US goods.
The United States agreed to lower its tariffs on Chinese goods to 30 percent while China will reduce its own to 10 percent.
These actions take effect at 12:01 am on Wednesday, according to an executive order released by the White House.
The United States also lowered a levy on low-value imports from China that had hit e-commerce sites such as Shein and Temu.
Under Trump's executive order, "de minimis" items sent through the US Postal Service will be hit with duties of 54 percent of their value, or a $100 payment. The prior tariff had been set at 120 percent.
Bessent told CNBC Monday that he expects United States and Chinese representatives to meet again in the coming weeks to work out "a more fulsome agreement."
While Washington does not want broad decoupling from China, it seeks "decoupling for strategic necessities," Bessent said.
He added to CNBC that the 90-day pause was also done to see what the United States could do about non-tariff barriers weighing on US firms.
China hailed the "substantial progress" made at the talks, held at the discreet villa residence of Switzerland's ambassador to the United Nations in Geneva.
This move "is in the interest of the two countries and the common interest of the world," the Chinese commerce ministry said, adding that it hoped Washington would keep working with Beijing "to correct the wrong practice of unilateral tariff rises."
With the agreement, China also committed to suspending or removing non-tariff countermeasures.
- Fentanyl 'cooperation' -
The US additional tariff rate remains higher than China's because it includes a 20 percent levy over Trump's complaints about Chinese exports of chemicals used to make fentanyl, US Trade Representative Jamieson Greer told reporters.
"Those remain unchanged for now," he said. But "both the Chinese and United States agreed to work constructively together on fentanyl and there is a positive path forward there as well."
In a joint statement, the two sides agreed to "establish a mechanism to continue discussions about economic and trade relations."
"I think we leave with a very good mechanism to avoid the unfortunate escalations," Bessent said, noting that the tariffs had essentially created a trade "embargo" between the two superpowers.
China's commerce ministry said both parties "will conduct rolling consultations on a regular or ad hoc basis in China, the US or agreed third countries."
- 'No guarantee' -
A suspension of higher tariffs marks "substantial de-escalation," said Capital Economics chief Asia economist Mark Williams in a note.
But "there is no guarantee that the 90-day truce will give way to a lasting ceasefire," he warned.
Washington appears to be seeking to rally others towards introducing restrictions on trade with China, he said.
Nonetheless, the latest development signals negotiations are moving to a more conciliatory phase, according to a Deutsche Bank Research note.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, believes the outcome of the weekend meeting was a "success" for Beijing.
"China took a tough stance on the US threat of high tariffs and eventually managed to get the tariffs down significantly without making concessions," he said.
Trump's tariffs and high rates targeting China have rocked financial markets, raising fears the levies would rekindle inflation and cause a global economic downturn.
The Geneva meeting came days after Trump unveiled a trade agreement with Britain, the first with any country since his new duties on both friend and foe.
US-China trade truce: key points
Paris (AFP) May 12, 2025 -
Here is a look at the key points in the 90-day agreement the United States and China announced Monday to de-escalate their market-roiling trade war.
- New US duties: 30% -
Washington agreed to reduce tariffs on Chinese goods from the additional 145 percent announced by President Donald Trump in April to 30 percent -- which will still be applied on top of pre-existing duties.
The new figure includes a 20-percent tariff Trump has imposed to pressure Beijing to do more to fight fentanyl trafficking, which has caused an addiction crisis in the United States.
- New Chinese duties: 10% -
Beijing, which had hit back at Trump's tariffs with retaliatory duties of 125 percent on US imports, agreed to slash them to 10 percent.
Each side thus agreed to cut its existing tariffs by 115 percentage points.
- 90 days -
The temporary truce reached in Geneva will take effect May 14, for a period of 90 days.
The two sides agreed to continue talks "in the spirit of mutual opening, continued communication, cooperation and mutual respect".
- Tariff spiral -
The world's top two economies had been waging an escalating war of tit-for-tat tariff measures since Trump returned to the White House in January.
Trump started his new term slapping additional duties of 10 percent on Chinese goods -- soon increased to 20 percent -- in response to China's role in fentanyl production.
Then, announcing his "Liberation Day" tariffs on April 2, Trump slapped an additional 34-percent levy on Chinese goods.
When China retaliated with a 34-percent tariff on US goods, Trump hit back, bringing the tariff to 104 percent.
China then upped its tariff to 84 percent, and Trump counter-attacked with 125 percent.
Adding the separate fentanyl-linked tariff, total US levies on Chinese goods had risen to 145 percent by April 10.
Where things stand in the US-China trade war
Beijing (AFP) May 12, 2025 -
The United States and China have agreed to slash tariffs on each other's goods, easing a trade war that has upended global markets and supply chains worth hundreds of billions.
AFP looks at the current state of play between the world's two economic superpowers:
- What has been announced? -
Washington and Beijing announced on Monday they will cut import tariffs on each other's goods by 115 percentage points for 90 days.
From Wednesday, the United States will reduce duties on products from China to 30 percent, and China will lower its levy on US imports to 10 percent.
US President Donald Trump had previously slapped 145 percent tariffs on most Chinese goods, with cumulative tolls on some products reaching a staggering 245 percent.
Beijing had hit back with duties of 125 percent on US goods.
The United States and China will also set up a mechanism for regular trade talks alternately in each country, or in an agreed third country, the joint statement said.
- How did the talks go? -
US Treasury Secretary Scott Bessent said discussions over the weekend with Chinese Vice Premier He Lifeng and international trade representative Li Chenggang had been "productive" and "robust".
He told reporters in Switzerland, where the talks took place, that "both sides showed a great respect".
Beijing said the negotiations had yielded "substantial progress", adding that the reductions served "the interest of the two countries and the common interest of the world".
Its commerce ministry urged Washington to "keep working with China and completely correct the wrong practice of unilateral tariff rises".
"It is hoped that the US will... maintain the healthy, stable and sustainable development of China-US economic and trade relations," the ministry said.
- How have markets reacted? -
Global stock markets rallied on the announcement.
Tai Hui, Asia-Pacific chief market strategist at JP Morgan Asset Management, said the cuts were "larger than expected", reflecting Washington and Beijing's understanding of the impact of tariffs on global economic growth.
Wei Yao, chief Asia-Pacific economist at Societe Generale, said the reductions would bring "substantial relief" for both economies.
And ANZ Bank analysts predicted that "both sides will focus on setting up a trade template, and a final deal will be reached before the US's 2026 mid-term election".
However, Wang Wen, dean of the Chongyang Institute for Financial Studies at Renmin University of China, warned that the deal "does not mean the resolution of structural contradictions between China and the United States".
- Is the trade war over? -
Far from it. The joint statement does not elaborate on what happens after the 90-day tariffs suspension.
"The US still has much higher tariffs on China than on other countries and still appears to be trying to rally other countries to introduce restrictions of their own on trade with China," said Mark Williams, chief Asia economist at Capital Economics.
"In these circumstances, there is no guarantee that the 90-day truce will give way to a lasting ceasefire."
The declaration also does not include sector-specific US tariffs on Chinese steel, aluminium and car imports.
China, meanwhile, has lodged complaints with the World Trade Organization against US "bullying" tactics.
And it has gone after US companies, scrapping orders for Boeing planes, probing Google for "anti-monopoly" violations, and adding fashion group PVH Corp. -- which owns Tommy Hilfiger and Calvin Klein -- and biotech giant Illumina to a list of "unreliable entities".
Beijing has also restricted exports of rare earth elements -- critical for making a wide range of products including semiconductors, medical technology and consumer electronics.
- What impact has the trade war had? -
China's trade surplus with the United States reached $295.4 billion last year, according to the US Commerce Department -- drawing Trump's ire.
Chinese leaders are reluctant to disrupt that status quo, but a worsening trade war weakens their ability to pin strong growth this year on exports, which hit a record high in 2024.
Analysts expect the levies to take a chunk out of China's gross domestic product, which Beijing's leadership have targeted to grow five percent this year.
US duties further threaten to harm China's fragile post-Covid economic recovery as it struggles with a debt crisis in the property sector and persistently low consumption.
And reciprocal tariffs are also having an impact in the United States, with uncertainty triggering a manufacturing slump last month and officials blaming them for an unexpected economic contraction during the first three months of the year.
Likely to be hit hardest are China's top exports to the United States, from electronics and machinery to textiles and clothing.
American manufacturers and consumers may also take a blow due to the crucial role of Chinese goods in supplying US firms.
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