US and China Agree to Slash Tariffs in Trade War De-escalation
The US and China have agreed to lower tariffs on each other’s goods substantially for 90 days, following their negotiations last weekend. According to the Guardian, speaking in Geneva, treasury secretary Scott Bessent says that “both sides will move their tariffs down by 115%,” having agreed a 90-day pause.
The Guardian reports that this is a significant de-escalation in the trade war that blew up last month. Before today, the US had lifted its tariff on China to 145% (including the 20% tariff added to tackle fentanyl imports into the US), with Beijing having retaliated with 125% tariffs on US imports.
Bessent tells reporters that “both sides showed great respect” during their talks, and that “we both have an interest in balanced trade.” The Guardian also reports that stock markets across Europe are rallying strongly, as investors hail the news that the US and China have agreed a 90-day pause to their trade war.
Germany’s DAX index has jumped by 1.5%, amid optimism that the trade war is cooling. Automakers are among the top risers in Frankfurt, with Mercedes-Benz (+5.5%), Daimler Trucks (+5.5%) and BMW (+5.4%) all gaining. France’s CAC index has risen by 1.2%.
According to The Guardian, there is general relief that tariffs are being cut between the US and China, at least for the 90-day window of opportunity. Ahmad Assiri, research strategist at brokerage Pepperstone, says:
“Economically, this step back in tariffs is not a structural fix or a comprehensive deal. But it signals a change in tone or at the very least a political willingness to pause. Under the surface, this move seems more like an effort to buy time. It may help pave the way for more serious talks over the coming three months. Markets read this as a sign that progress is possible.”
The Guardian also reports that London’s market is lagging, though, with the FTSE 100 index only up 10 points, or 0.03%. Mining stocks are jumping in London, such as Glencore (+6.3%), and Anglo American (6.2%).
The White House has released a joint statement outlining the agreement reached at the US-China economic and trade meeting in Geneva. It confirms that the two sides are both cutting the reciprocal tariffs on each other’s goods by 115 percentage points, and are “moving forward in the spirit of mutual opening, continued communication, cooperation, and mutual respect”.
Treasury secretary Scott Bessent and US trade representative Jamieson Greer also have warm words for the way the Swiss government looked after them during their weekend of negotiations in Geneva. Bessent says Switzerland, like the UK, have “moved to the front of the queue” for a trade deal (a nod to the agreement announced between Washington and London last week).
The Guardian reports that US trade ambassador Jamieson Greer outlined why the Trump administration was determined to reshape global trade. Greer says the US spent decades at the World Trade Organization, and holding multilateral and bilateral negotiations, trying to get other countries to reduce their tariffs and non-tariff barriers, and to agree more reciprocal trade with the US.
The US side also suggest that they have agreed a “very good mechanism” to avoid unfortunate escalations with China over trade in future.
The Guardian also reports that oil, a gauge of global growth prospects, has risen more than 1% today after the US and China both touted progress at their trade talks. Brent crude, the international benchmark, has risen by 80 cents per barrel to $64.75/barrel, the highest level since 29 April.
Iron ore prices have also risen, after the US and China reported progress in their trade talks. The benchmark June iron ore contract on the Singapore Exchange is up 2.2%, to around $99 per tonne.
The two sides have promised to release details about what was agreed later today, after both issuing encouraging statements on Sunday after the talks wrapped up. Last night, the White House announced a “China Trade Deal” had been reached in Geneva.
For Beijing, Vice Premier He Lifeng said the China-U.S. high-level meeting on economic and trade affairs were “in-depth, candid and constructive”. He explained that the two countries have agreed to a new “trade consultation mechanism”.
Markets have responded positively, even though neither side has yet released any specific details of possible points of agreement. China’s CSI300 share index has risen 0.8%, while Hong Kong’s Hang Seng index is up 1.2%. Japan’s Nikkei has risen a more modest 0.3%.
Kyle Rodda, senior financial market analyst at capital.com, says:
“It remains the case that there’s more style than substance when it comes to the trade policy narrative: not as much as a pledge to lower tariffs has been given, let alone a substantive and comprehensive deal. Nevertheless, what the US is touting as ‘productive’ talks and Trump has labelled a ‘reset’ is a clear statement of intent from the US to wind back existing tariffs.”
The markets and negotiators are on the clock now to reach an agreement before the damage of existing tariffs begins to seriously weaken economic activity, especially in the US.
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