U.S. and China agree to slash most tariffs for 90 days
After days of high-level negotiations, the United States and China announced significant progress on their bilateral trade agenda, as part of a new effort to reduce economic tensions between the two powers. On Monday, May 12, the governments of both countries announced they had reached an agreement to reduce tariffs to 30% and 10% respectively, for 90 days. The pact eases fears of a recession amid the trade war, fueled by US President Donald Trump since last February, which has spread across the globe.
The two powers reached an agreement on May 12, according to which Washington will reduce tariffs on the Asian giant from 145% to 30%. For its part, Beijing will reduce tariffs on the United States from 125% to 10%. This was announced by US Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent at a press conference in Geneva. "Neither side wants a dissociation"
The trade truce will be extended for 90 days, during which time officials from both countries will continue talks to resolve economic disputes, the two governments announced.
"The consensus of both delegations this weekend is that neither side wants a decoupling (...) And what happened with these very high tariffs was an embargo, the equivalent of an embargo. And neither side wants that. We do want trade," Bessent said.
"We want more balanced trade. And I think both sides are committed to achieving that," he added.
The announcement comes after delegations from both countries, escorted through the city and guarded by numerous Swiss police officers, met for at least 12 hours between Saturday and Sunday at a sun-drenched 17th-century villa that serves as the official residence of the Swiss ambassador to the United Nations in Geneva.
Recession fears ease
Stock markets rose sharply after the world's two largest economic powers retreated in a confrontation that has destabilized the global economy.
The dollar also strengthened after the news, helping to allay concerns about a recession triggered last month by U.S. President Donald Trump's escalating tariff measures aimed at reducing his country's trade deficit, he said.
"Both countries represented their national interests very well (...) We both have an interest in balanced trade, and the United States will continue to move toward that," US Treasury Secretary Scott Bessent said in a conciliatory tone after meeting with Chinese officials in Geneva.
The tariff dispute has paralyzed nearly $600 billion in bilateral trade, disrupting supply chains, raising fears of stagflation, and causing some layoffs.
The meetings in Geneva were the first face-to-face interactions between senior U.S. and Chinese economic officials since Trump returned to power and launched a global tariff offensive, imposing particularly high tariffs on China.
"This is better than I expected." Bessent stated that the agreement reached so far does not include sector-specific tariffs and that the United States would continue its strategic rebalancing in areas such as pharmaceuticals, semiconductors, and steel, where it had identified "vulnerabilities" in the supply chain. However, the agreement went further than many analysts expected after weeks of conflicting trade rhetoric.
"This is better than I expected. I thought the tariffs would be reduced to around 50%," said Zhiwei Zhang, chief economist at Pinpoint Asset Management in Hong Kong.
"This is obviously very positive news for both countries' economies and for the global economy, and it makes investors much less concerned about the damage to global supply chains in the short term," Zhang added.
Since returning to the White House last January, Trump had raised tariffs on US importers paying on goods from China to 145%, in addition to those he imposed on many Chinese products during his first term and those imposed by the Biden administration.
China counterattacked by imposing export restrictions on some rare earth elements, vital to US manufacturers of weapons and consumer electronics, and raising tariffs on US products to 125%.
China's participation and support in the World Trade Organization (WTO)
From Geneva, the Director-General of the World Trade Organization (WTO), Ngozi Okonjo-Iweala, celebrated the outcome of the meetings through her official account on the social network X (formerly Twitter): "I thank His Excellency Vice Premier He Lifeng of China for the excellent discussions following the fruitful meeting between the United States and China in Geneva. We hope this détente will have a positive impact on global trade. I also appreciate that Vice Premier and International Trade Representative, His Excellency Chenggang Li, took the time to discuss the challenges facing the WTO and the reforms we need."
Okonjo-Iweala stated that this type of bilateral rapprochement can have "positive spillover effects" on global trade, bringing predictability to the multilateral system and creating opportunities for the most vulnerable economies.