On May 12, 2025, the United States and China reached a significant agreement to reduce tariffs for a 90-day period, aiming to ease escalating trade tensions between the two economic giants. The deal was announced following high-level negotiations in Geneva, Switzerland, and has been described as a “pause” in the ongoing trade war. This will come as a strong reprieve for many businesses and trade networks affected by the tariff war initiated by US president Donald Trump as China had also been responding with its own tariffs escalating the tensions.
Key Provisions of the Agreement
Tariff Reductions: The United States will lower tariffs on Chinese imports from 145% to 30%, while China will reduce tariffs on U.S. goods from 125% to 10%. These reductions are set to last for 90 days, providing a window for further negotiations.
De Minimis Exemption: The agreement does not reinstate the de minimis exemption, which previously allowed small-value shipments to enter the U.S. duty-free. This change has impacted e-commerce platforms like Temu and Shein.
Market Reactions: Financial markets responded positively to the news, with major indices in the U.S., Asia, and Europe experiencing substantial gains. Cryptocurrencies also saw an uptick, with Bitcoin briefly spiking to $105,500 before stabilizing.
Broader Context
This temporary tariff reduction follows a period of heightened market volatility stemming from previous U.S. tariff announcements. The U.S. had imposed tariffs as high as 145% on Chinese goods in response to long-standing trade and intellectual property grievances. China retaliated with tariffs on U.S. exports, leading to a significant trade imbalance and economic strain.
The agreement is seen as a step toward de-escalating tensions and paving the way for more comprehensive negotiations. Both nations have emphasized the importance of continued dialogue and the mutual benefits of a stable trade relationship.
Outlook
While the 90-day tariff reduction provides temporary relief, the underlying issues that led to the trade war remain unresolved. Future negotiations will likely focus on structural reforms in areas such as intellectual property protection, technology transfer, and market access. The success of these talks will depend on the willingness of both parties to make concessions and address longstanding concerns.
In conclusion, the latest U.S.–China trade deal marks a significant development in the ongoing trade war, offering a temporary respite and the potential for more substantive agreements in the future.
