U.S., China agree to substantially lower tariffs

Published 2025-05-12, 03:28 a/m
© Reuters

Investing.com - The U.S. and China have agreed to a 90-day pause to soaring tariffs placed on each other and will temporarily lower their respective levies, the two countries announced on Monday.

Washington has moved to slash U.S. President Donald Trump’s so-called "reciprocal" tariffs on China to 10%, while a 20% tariff related to Beijing’s alleged role in the flow of the illegal drug fentanyl remains in force. Meanwhile, China’s duties on U.S. imports are being cut to 10%, the nations said in a rare joint statement following high-stakes trade talks over the weekend. 

"The consensus from both delegations is that neither side wanted a decoupling," U.S. Treasury Secretary Scott Bessent said in a news conference, added that there is now a "good mechanism" to avoid any further ratcheting up in tensions.

More negotiations are planned between the two, while both sides may conduct working-level consultations on relevant economic and trade issues, the countries said.

Investors, who have been worried that the trade spat may spiral into a crisis that could threaten global economic activity and increase uncertainty for businesses, have seemingly welcomed the changes. U.S. stock futures surged, extending gains that were already notched on Sunday evening ahead of the announcement. The U.S. dollar gained against a basket of its currency pairs and China’s yuan also strengthened.

Representatives from the U.S. and China previously suggested that their discussions had resulted in some progress in thawing trade relations between the world’s two largest economies. Heading into the talks, Trump had raised tariffs on China to at least 145%, leading Beijing to respond with retaliatory levies on American imports of 125%. Bessent had suggested that the moves effectively amounted to a "trade embargo".

Despite the relaxation in these sky-high tariffs, analysts have noted that levies remain above where they were at the beginning of Trump’s second term in the White House earlier this year. Along with the remaining U.S. duties on China, universal 10% tariffs as well as levies on items like steel, aluminum and autos are still in effect.

Possible weakness in upcoming economic data could also dent market sentiment that has shown signs of recovering from tariff-fueled ructions in recent months, said Chris Beauchamp, Chief Market Analyst at IG.

"For the moment, however, investors are content to ride the wave of euphoria from today’s news," Beauchamp added.

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