Tit-for-tat trade standoff: Ways China weakens Donald Trump's economic stance
DC's Dial-Down on Duties: US-China Agreement, Unpacked
After two intense days of negotiations in Geneva, Switzerland from May 10-11, the world's economic titans made a pivotal announcement on Monday, May 12. They revealed that they would halt most of the trade-obstructing tariffs that had been clashing for close to a month. At 3 PM Beijing time, 3 AM Washington time, the capitals released a joint statement, signifying an accord that would put a hold on the majority of punitive tariffs for 90 days.
The U.S. levied tariffs on Chinese goods, which had escalated to a staggering 145%, will now dip to a more manageable 30%, while China's tariff on U.S. goods, previously spiking to 125%, will go down to 10%. “We’re on the same page — neither side fancies a break-up,” commented U.S. Treasury Secretary Scott Bessent, who spearheaded the U.S. delegation in Switzerland, partnered with Commerce Representative Jamieson Greer. A framework for ongoing discussions regarding their economic and trade relations was also agreed upon by both parties. This revelation instantly sent markets soaring, with oil prices and the Hong Kong stock market leaping by 3% in the immediate aftermath.
Key Insights:
- In this agreement, the US suspends 24 percentage points of the additional ad valorem rate on Chinese imports for an initial period of 90 days, bringing U.S. tariffs back to a baseline of 10% on these products.
- China lifts certain non-tariff retaliation measures set in place in early April.
- The decrease in tariffs will decrease the negative economic impact of all 2025 tariffs by 40% when measured by effects on the price level and GDP.
- The overall average effective tariff rate faced by consumers remains high at 16.4%, with the price level increase due to tariffs estimated at 1.4% after consumer substitution.
- The agreement is seen as a positive step towards de-escalating trade tensions and improving bilateral relations.
This agreement represents a crucial step toward stabilizing the economic and trade relationship between the U.S. and China, which could potentially result in broader economic benefits. However, the final outcome will depend on the efficacy of future negotiations and the longevity of the tariff reductions.
- The agreement in the US-China trade dispute is likely to impact various sectors of business, particularly finance, as tariffs on goods are reduced, potentially boosting investment and trade.
- This general-news event, the US-China agreement on trade tariffs, has significant implications for the industry, as it might reshape the existing business dynamics between the two economic giants.
- The US-China agreement on trade tariffs is proving to be a significant development in the world of politics, as it demonstrates the power of diplomacy in managing international disputes and promoting economic stability.
