Locations Affected: United States, China
The United States and China have agreed to significantly lower tariffs (by 115 percent) on each other’s goods for 90 days, starting 14 May, following high-level trade negotiations in Switzerland. This temporary agreement, announced on 12 May, marks a major de-escalation in a trade war that had strained global supply chains and economic stability.
Trade tensions reignited in February 2025 when US President Donald Trump imposed tariffs, including a 10 percent levy on Chinese goods, aimed at boosting the domestic economy. China retaliated with equivalent tariffs, sparking successive rounds of escalation. By early May, the US had a 145 percent tariff on Chinese goods (with some goods facing 245 percent), while China had imposed 125 percent across all American goods. These measures led to a contraction in US GDP and a decline in Chinese manufacturing exports. Urgent negotiations began on 10 May in Geneva, led by Chinese Vice Premier He Lifeng, US Treasury Secretary Scott Bessent, and Trade Representative Jamieson Greer. The Geneva summit marked the first face-to-face meeting between senior officials since Trump returned to office.
So What:
- Tariff reductions: The US will lower its tariffs on Chinese goods from 145 percent to 30 percent; China will reduce its tariffs from 125 percent to 10 percent.
- Non-Tariff concessions: China will suspend various non-tariff retaliatory measures, including export bans on rare earths, blacklisting US companies on “unreliable entity” and “export control” lists, and an anti-monopoly investigation into the American chemical company DuPont.
- Ongoing dialogue: A formal dialogue mechanism will rotate between China, the US, or neutral venues like Switzerland.
- Limitations remain: The 20 percent tariffs related to fentanyl-based goods remain, and not all blacklisted companies have been removed.
- Economic impact: The agreement brought immediate relief to markets and supply chains. Small and mid-sized US businesses, especially retailers, welcomed the move as critical to avoiding further disruptions ahead of the holiday season.
Outlook:
The short-term outlook is optimistic. Leading financial institutions have upgraded GDP forecasts for both nations and analysts expect improved trade volumes across the Pacific. However, the 90-day window is short and core trade issues including the US trade deficit and Chinese industrial policy disagreements remain unresolved. If no permanent deal follows, tariffs could be reinstated, risking renewed volatility.
