The United States and China have reached an agreement to significantly reduce tariffs on each other's goods for an initial period of 90 days. This development follows extensive trade negotiations in Geneva, Switzerland, involving officials from both nations. The joint statement released highlights the "substantial progress" made during these discussions and emphasizes the importance of a sustainable and mutually beneficial economic and trade relationship.
The trade war, initiated by US President Donald Trump's tariffs, has impacted global financial markets and supply chains. However, the recent agreement has led to a positive response from investors, with Dow futures increasing by over 2%, S&P 500 futures rising nearly 3%, and Nasdaq Composite futures climbing more than 3.5% during Asian trading. Asian markets also saw gains, with Hong Kong's Hang Seng index rising over 3%.
Under the new agreement, both countries will adjust their tariffs by May 14. The US will temporarily reduce its overall tariffs on Chinese goods from 145% to 30%, while China will lower its tariffs on American imports from 125% to 10%. Notably, the US will maintain its 20% fentanyl-related tariffs on China.
The trade war has already influenced the economies of both nations. The US experienced its first quarterly GDP contraction since early 2022, as importers accelerated shipments to avoid high tariffs. Meanwhile, China's exports to the US declined, affecting its manufacturing sector, with factory activity contracting at its fastest pace in 16 months in April. This has prompted Beijing to consider new economic stimulus measures.
Dan Ives, managing director at Wedbush Securities, described the agreement as a "best-case scenario" and anticipates further reductions in tariffs as negotiations continue. The two countries have also agreed to establish a mechanism for ongoing discussions, led by Chinese Vice Premier He Lifeng, US Treasury Secretary Scott Bessent, and US Trade Representative Jamieson Greer.
According to Bessent, neither side desires a decoupling, and the high tariffs were akin to an embargo. The goal is to achieve a more balanced trade. A spokesperson for China's Commerce Ministry called the joint statement "an important step" toward resolving differences through dialogue and consultation.
Source: CNN