US and China Agree to Temporarily Cut Tariffs to Ease Trade Tensions

The United States and China have decided to temporarily reduce tariffs on each other’s goods. They made the announcement through a joint statement in Geneva. This step aims to reduce trade tensions and gives both countries three more months to work out their issues.

Tariff rates will drop by mid-May

By May 14, the US will lower its combined 145% tariffs on most Chinese goods to 30%. This includes the tariffs related to fentanyl. At the same time, China will reduce its 125% duties on American products to 10%. These changes were confirmed by officials during a press briefing on Monday.

Progress made on fentanyl issue

US Treasury Secretary Scott Bessent said the two sides had a serious and useful discussion about fentanyl. He added, “We had a very robust and productive discussion on steps forward on fentanyl.” He also said that both countries agreed they do not want to break off economic ties, stating, “We are in agreement that neither side wants to decouple.”

Talks will continue through a new mechanism

The statement mentioned that both nations will set up a new process to continue their talks about trade and economic relations. This move is seen as a step toward ending a long and damaging tariff war that has already reduced trade between the two nations.

Earlier progress gave hope to markets

Earlier, both sides said they made “substantial progress” in the talks. That news helped boost investor confidence and allowed Chinese stocks to recover after losing value. The drop began after former President Donald Trump introduced new tariffs on April 2 during his “Liberation Day” speech.

US wants fairer trade

US Trade Representative Jamieson Greer stated that America wants more balanced trade with China. Meanwhile, the White House referred to this announcement as a “trade deal” in a statement released on Sunday. However, both sides have not yet agreed on a final goal or timeline.

China wants all tariffs gone

China had earlier insisted that the US remove all tariffs introduced this year. But the US wants to reduce its trade deficit, so completely ending the tariffs may not align with Washington’s goals.

History shows final deals take time

Even though markets welcomed the recent news, past events show that reaching a full agreement could take a long time. For example, in 2018 both countries said they would pause their dispute after a round of talks. But soon after, the US pulled out of that agreement, leading to more than 18 months of new tariffs and negotiations.

Previous deal fell short

In January 2020, the two sides signed a “Phase One” trade deal. As part of it, China agreed to buy more American goods. However, it did not meet those targets. The US trade deficit with China even grew during the COVID-19 pandemic. That failure eventually triggered the latest round of tariff increases.