U.S. and China Agree to 90-Day Trade War Truce with Tariff Reductions

 Geneva, May 12, 2025 — The United States and China have reached a landmark agreement to pause their escalating trade war for 90 days, announcing a mutual reduction of tariffs by 115% to stabilize the global economy. The deal, finalized after intensive negotiations in Geneva, marks a significant step toward de-escalation between the world’s two largest economies.

Details of the Agreement

The 90-day truce targets tariffs imposed on April 2, 2025, by U.S. President Donald Trump, which had reached 125% on Chinese imports, prompting equivalent retaliatory measures from Beijing. Under the agreement, Chinese duties on U.S. goods will decrease to 10%, while U.S. tariffs on Chinese goods will drop to 30%. The U.S. tariff rate includes a pre-existing 20% levy tied to China’s alleged role in the U.S. fentanyl crisis, which remains in effect.

U.S. Treasury Secretary Scott Bessent, addressing the media post-talks, emphasized the constructive nature of the negotiations. “Both delegations demonstrated great respect and a shared desire to avoid economic decoupling,” Bessent said. He highlighted China’s engagement on the fentanyl issue, noting, “For the first time, the Chinese side grasped the severity of the crisis in the U.S.”

China’s Ministry of Commerce welcomed the agreement, stating, “This move aligns with the interests of producers, consumers, and the global community.” The ministry urged the U.S. to abandon unilateral tariff hikes and foster mutually beneficial cooperation moving forward.

Economic and Market Implications

The announcement triggered immediate market responses. China’s yuan surged to a six-month high, reflecting optimism about the trade pause. Analysts estimate that up to 16 million jobs in China were at risk due to the trade war, while the U.S. faced rising inflation and supply chain disruptions from tariffs on its largest goods supplier.

European stock markets also rallied, with Germany’s DAX index rising 1.5%—led by gains in Mercedes-Benz, Daimler Trucks, and BMW—and France’s CAC index climbing 1.2%. William Xin, chair of Spring Mountain Pu Jiang Investment Management, told Reuters, “This outcome exceeds market expectations, providing much-needed certainty. Chinese stocks and the yuan are poised for an upswing.”

Broader Context and Reactions

The trade war intensified when China imposed non-tariff measures, including restrictions on critical mineral exports essential for U.S. high-tech manufacturing. U.S. Trade Representative Jamieson Greer described China’s response as “disproportionate,” likening it to a de facto trade embargo. The truce alleviates these pressures, though the fentanyl-related tariff remains a point of contention.

A joint U.S.-China statement issued on May 11 affirmed both nations’ commitment to “openness, continuous communication, and mutual respect” in advancing related work. However, Wang Wen, head of the Chongyang Institute for Financial Studies at Renmin University, cautioned that the agreement does not resolve “structural contradictions” between the two powers, predicting potential future frictions.

Chinese commentator Hu Xijin, former editor of Global Times, hailed the deal as a “victory for China’s principles of equality and mutual respect” on Weibo. He contrasted it with the recent U.S.-UK trade deal, which retained a 10% U.S. tariff on UK imports without reciprocal measures from London.

While the 90-day pause offers temporary relief, analysts remain cautious about long-term prospects. The agreement signals a willingness to negotiate but leaves unresolved issues, including technology transfers, intellectual property rights, and geopolitical tensions. As both nations navigate this truce, the global economy watches closely for signs of sustained cooperation or renewed conflict.

Sources: U.S. Treasury Department, China Ministry of Commerce, Reuters, BBC News, The Financial Times, posts on X.