USA and China Reduce Reciprocal Tariffs from 125% to 10%

The United States and China announced on Monday that they have reached an agreement to temporarily reduce ‘reciprocal’ tariffs in an effort by the two largest economies in the world to end the trade war that has disrupted global forecasts and unsettled financial markets.

In a statement to reporters following negotiations with Chinese officials in Geneva, U.S. Treasury Secretary Scott Bessent stated that the two sides agreed to a 90-day suspension of measures and a reduction of ‘reciprocal’ tariffs to 10%. Previously, these tariffs were set at 125% and 145%.

– Both countries have excellently represented their national interests. It is in all our interests to have balanced trade, and the U.S. will continue to strive in that direction – said Bessent, adding that what happened with the imposition of exceptionally high tariffs was equivalent to an embargo, which neither side wants.

Secretary Bessent and Trade Representative Jamieson Greer addressed reporters after negotiations with their Chinese counterparts, and both sides welcomed the reduction of disagreements. At meetings held in Geneva over the weekend, senior U.S. and Chinese officials responsible for the economy met face-to-face for the first time since U.S. President Donald Trump returned to the White House and initiated a global tariff war, imposing particularly high tariffs on imports from China.

Since taking office in January, Trump has increased the tariffs that U.S. importers pay on goods from China to 145%, along with tariffs on certain Chinese goods that he imposed during his first term and tariffs introduced by Biden’s administration. China retaliated by restricting the export of certain rare metals essential to U.S. weapons and electronics manufacturers and raising tariffs on imports from the U.S. to 125%.

The tariff conflict has led to stagnation in bilateral trade worth nearly $600 billion, causing disruptions in supply chains, raising concerns about inflation caused by stagnation, and leading to job losses. These negotiations have sparked hope of avoiding a global recession, prompting futures contracts on Wall Street to surge on Monday, and the dollar strengthened against safe-haven currencies.

90-Day Breather

The tariff conflict has led to stagnation in mutual trade worth nearly $600 billion, causing disruptions in supply chains, raising concerns about inflation caused by stagnation, and leading to job losses.

Encouraged by the latest in a series of concessions in the trade war, financial markets have recovered, and futures contracts on Wall Street surged thanks to U.S.-China negotiations that have awakened investor hopes that we might avoid a global recession.

– This is better than expected. I expected tariffs to be reduced to about 50%. Of course, this is extremely good news for the economies of both countries, as well as for the global economy, and it significantly alleviates investors’ concerns about the damage that has been inflicted on global supply chains in the short term – said Zhiwei Zhang, chief economist at Pinpoint Asset Management in Hong Kong.

After negotiations held on Sunday, U.S. officials boasted early this morning about an ‘agreement’ to reduce the U.S. trade deficit, while Chinese officials emphasized that the two sides had reached an ‘important consensus’ and agreed to launch yet another new forum for economic dialogue.

Trump rated the negotiations positively even before they concluded, stating that the two sides had agreed on ‘completely new arrangements… in a friendly but constructive manner.’ The U.S. President imposed tariffs partly due to a national crisis regarding the influx of fentanyl into the U.S., and Greer stated that discussions on curbing the deadly drug were ‘very constructive,’ although they were held separately.

Statements from Chinese Vice Premier He Lifeng were not as explicit, but he also welcomed the ‘significant progress’ made during the negotiations.