US Treasury Secretary Scott Bessent (right) and US Trade Representative Jamieson Greer hold a news conference in Geneva on May 12, 2025, to give details of "substantial progress" following a two-day closed-door meeting between US and China top officials aimed at ending a devastating tariff war. – AFP
GENEVA (Bloomberg): The United States and China will temporarily lower tariffs on each other's products, according to a joint statement, in a move to cool trade tensions and give the world's two largest economies three more months to resolve their differences.
The combined 145% US levies on most Chinese imports will be reduced to 30% , including the rate tied to fentanyl by May 14, while the 125% Chinese duties on US goods will drop to 10%, according to the statement and officials in a briefing on Monday (May 12) in Geneva.
"We are in agreement that neither side wants to decouple," US Treasury secretary Scott Bessent said, adding that "we had a very robust and productive discussion on steps forward on fentanyl" and that talks might lead to "purchasing agreements" by China.
Bessent added that the tariff reductions announced today don't apply to sectoral duties imposed on all US trading partners, and the tariffs applied on China during the first Trump administration remain in place.
Equity markets in Asia and Europe rose after the announcement, and S&P 500 futures jumped 3%. Oil prices increased, Treasury yields gained and the dollar was stronger. The offshore yuan extended gains against the dollar, rising about 0.5%.
The US statement also said "the parties will establish a mechanism to continue discussions about economic and trade relations."
Beijing's response
China has always handled relations with the United States based on the principles of mutual respect, the official Xinhua News Agency reported, citing a white paper on national security. China is committed to the stable development of relations with the United States, it said, and imposing pressure and threats are not the right way to deal with China.
The announcement represents a step toward de-escalating a tariff war that has led to an immediate slump in trade across the Pacific Ocean. The two countries had earlier reported "substantial progress" in their talks, which buoyed markets and helped Chinese stocks recoup their losses since President Donald Trump's "Liberation Day" announcement of tariffs on April 2.
Trade representative Jamieson Greer said the United States wants to have more balanced trade with China and "our Chinese counterparts clearly came to deal this week."
The White House called the agreement a "trade deal" in an initial statement on Sunday, but it is still unclear what an acceptable goal is for both sides or how long it will take to get there. China previously demanded that the United States remove all the tariffs it has imposed this year, which is incompatible with the US objective of reducing or ending the trade deficit.
While markets greeted recent reports of progress, history suggests that it could take a long time to reach a detailed agreement, if one is possible. In 2018, the two sides also agreed to put their dispute "on hold" after a round of negotiations but the United States soon backed away from that deal, leading to more than 18 months of further tariffs and talks before the signing of the "Phase One" trade deal in January 2020.
In the end, China failed to live up to the purchase agreement in that deal and the US trade deficit with China jumped during the pandemic, setting up the current trade war. – Bloomberg
