In a significant step toward easing global trade tensions, the US and China Reduce Tariffs in a joint move to pause further trade restrictions for a period of 90 days. The decision, made during a high-level meeting held in Geneva over the weekend, reflects a rare moment of cooperation between the two economic superpowers after years of escalating disputes.
Speaking at a press conference on May 12, US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer confirmed that both nations would suspend the implementation of new tariffs for 90 days. More notably, both sides agreed to dramatically reduce existing tariffs on imports, offering immediate relief to exporters and global markets.
According to the new agreement, the United States will cut import taxes on Chinese goods from a steep 145% to just 30%. In a reciprocal move, China will slash its tariffs on American goods from 125% down to 10%. This represents a joint reduction of 115 percentage points—a substantial shift in policy that could reshape trade flows between the two countries.
Why the US and China Decided to Reduce Tariffs
The decision comes amid growing concerns about inflation, disrupted supply chains, and a slowing global economy. Over the past few years, the trade war between the US and China has led to higher costs for businesses and consumers alike, with tit-for-tat tariffs hurting exporters and raising prices on everything from electronics to agricultural goods.
Reducing tariffs is seen as a way to stabilize bilateral relations and restore predictability to trade. According to US officials, the talks in Geneva were focused on correcting long-standing imbalances. In particular, the US has long criticized China’s trade practices and cited a massive trade deficit – $361 billion in 2024 alone—as a key issue.
“By reducing tariffs, we aim to create a more level playing field for American businesses while also supporting global economic recovery,” said Treasury Secretary Bessent.
Chinese Perspective: Constructive Dialogue Leads to Breakthrough
China’s Vice Premier He Lifeng, who led the Chinese delegation at the Geneva talks, described the meeting as “deep, frank, and constructive.” Speaking through the state-run Xinhua News Agency, he emphasized that both parties reached a wide range of consensuses, including the establishment of a permanent economic and trade consultation mechanism.
“The decision by the US and China to reduce tariffs signals a shared willingness to return to dialogue and manage differences through cooperation rather than confrontation,” He stated.
The agreement also mandates that both countries take initial actions before May 14. In addition to lowering tariffs, China has committed to lifting certain non-tariff barriers that have been in place since April 2. These include regulatory restrictions, quotas, and licensing challenges that have affected US exporters.
Strong Market Reactions to the News
The announcement that the US and China are reducing tariffs triggered a sharp uptick in global financial markets. US stock futures surged, with the S&P 500 up 2.8%, the Nasdaq 100 rising 3.6%, and the Dow Jones Industrial Average increasing by 2.3%. Analysts noted that the move brought a sense of optimism and relief to investors, who had been bracing for a potential escalation in trade tensions.
“Markets love certainty, and the news that the US and China will reduce tariffs provides exactly that,” said an analyst at Morgan Stanley. “It also suggests that further disruptions to global supply chains may be avoided—for now.”
Long Road Ahead: Will Tariff Cuts Lead to a Full Trade Agreement?
Despite the breakthrough, experts remain cautious about the long-term implications. Tianchen Xu, a senior economist at the Economist Intelligence Unit (EIU), warned that while this agreement is a positive step, a comprehensive trade deal between the two nations remains elusive.
“Reaching something like the Phase One trade agreement from the Trump era will take significant time and political will on both sides,” Xu noted. “Right now, neither Washington nor Beijing appears ready to make deeper compromises on core strategic issues such as intellectual property, tech access, and industrial subsidies.”
Still, the reestablishment of a formal dialogue mechanism between the US and China is seen as a key development. According to the joint statement, future trade consultations will take place regularly, alternating between the two countries or in a neutral third country if mutually agreed. Both sides have also committed to holding special consultations when urgent economic or trade issues arise.
A Flashback to the Phase One Deal and What It Means Today
This new tariff reduction agreement draws comparisons to the Phase One trade deal signed in January 2020, in which China committed to buying at least $200 billion worth of US goods and services over two years. In return, the US lowered certain tariffs on Chinese products.
However, the COVID-19 pandemic disrupted implementation, and many of China’s purchasing commitments went unfulfilled. The current move to reduce tariffs could be seen as a reset—an opportunity to revisit economic cooperation with more realistic expectations and stronger mechanisms for accountability.
Conclusion: US and China Reduce Tariffs – A Turning Point?
The decision by the US and China to reduce tariffs marks a critical moment in the evolving economic relationship between the two countries. While it may not resolve all disputes, it lays the groundwork for more consistent and constructive engagement.
As both sides move forward with cautious optimism, the world will be watching closely to see whether this temporary truce can lead to lasting stability in global trade.
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Source: Reuters
