U.S.-China: A 90-day pause on trade tariffs
A Deal to Shed Most Tariffs: A Game-Changer in US-China Relations
In a historic turn of events, the United States and China have struck an agreement to step back from their trade wars, carving out a 90-day window for discussions that could redefine commerce between these economic titans. The signing took place late Sunday at the scenic Lake Geneva, marking the most substantial effort yet this year to ease the tense standoff between Washington and Beijing.
"We've made some significant headway, and I dare say these conversations initiated some propitious progress," said U.S. Treasury Secretary Scott Bessent during a press conference on Monday, standing alongside U.S. Trade Representative Jamieson Greer. "Both parties have agreed to a 90-day truce, with tariffs reducing by a jumbo 115% from their current levels," added Bessent. Notably, this phrasing essentially translates to the near-complete elimination of imposed taxes in the last two years. The primary aim is to defuse the final round of tariffs proposed by former President Donald Trump, primarily tariffs up to 145% on Chinese imports, matched with China's retaliatory measures, imposing tariffs up to 125%.
Meanwhile, the Chinese contingent—led by Vice Premier He Lifeng—confirmed their aspiration to establish a permanent "bilateral consultation mechanism on trade." He noted, "We've had constructive dialogues with our American counterparts. China is poised to continue this collaboration."
The negotiations were backed by the World Trade Organization and the Swiss Confederacy, who ensured security during the meeting. The U.S. delegation arrived with clear demands: fairer competition in China's export market, increased transparency regarding industrial practices, and blocking the shipment of chemical precursors used for the production of Fentanyl, addressing the opioid epidemic's center. Beijing, in contrast, pushed hard for an immediate halt to this "unjustified tariff war."
Saturday night witnessed optimistic statements by President Trump regarding the possible positive outcome of negotiations, hinting at a "full reset" in commercial relations and "great advances" incoming. On Sunday afternoon, word from White House sources suggested a possible 80% reduction in Chinese tariffs; however, White House spokesperson Karoline Leavitt clarified that such a reduction was still up for discussion, not a formal offer.
This agreement prompted an immediate reaction from global financial markets. When trading resumed on Monday, S&P 500 futures opened with a 0.8% rise, continuing to climb, along with the Dow Jones and the Nasdaq. The technology sector, often targeted due to the trade war, welcomed this respite. In Asia, the Chinese yuan shot up to two-month highs against the dollar, while the Shanghai and Hong Kong indices rose 1.5% and 2% respectively, driven by industrial and consumer electronics stocks.
One economist, Alicia Tan of the Singapore School of International Studies, commented on this event: "A ceasefire in the trade war signals a pivotal moment for markets, although various uncertainties loom in the coming months. Despite structural disputes remaining unresolved in 90 days, the resilience shown by both delegations during the extended talks is promising."
Diplomats look forward to another round of discussions tentatively scheduled for mid-June, once again in Switzerland. Interestingly, Geneva, known for its neutrality and the World Trade Organization's support, seems poised to lock down its position as the epicenter for US-China trade talks.
The Chinese media, while cautious in their tone,See Chinese media adopts a cautious tone. The People's Daily, the official organ of the Communist Party, acknowledged the agreement as an "important step in the right direction," but stressed, "The true test lies in the sustainability of the dialogue and both parties' willingness to find common ground."
As we move forward, the question remains whether this ceasefire can translate into a lasting agreement. The path ahead remains long and arduous, with unresolved issues such as unfair competition practices, technology restrictions, and investments on the table. For now, however, the markets have received a window of hope:dialogue has resumed.
- In the realm of finance, the proposed reduction of tariffs by 115% from current levels as a result of the US-China deal is expected to significantly impact the average business in both countries, potentially leading to lower production costs and increased profitability.
- The general-news implication of this ceasefire in the trade war is that it may foster a more conducive environment for political discussions, with the potential for both nations to address long-standing issues in business and commerce, such as unfair competition practices and technology restrictions.
