US and China to slash tariffs for 90 days after talks yielded 'substantial progress'

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Summary:

The US and China agreed to a 90-day pause in their trade war, slashing tariffs significantly after talks showed progress, boosting markets and setting the stage for further negotiations on key issues.

Two days of high-stakes talks between the US and China have led to a 90-day pause on tariffs, with duties set to drop by 115 percentage points on both sides by Wednesday.

The move will drop American tariffs on Chinese goods, which currently run as high as 145%, to 30% and slash China's retaliatory duties from 125% to 10%.

It marked a dramatic pause in a trade war between the two nations that had been the equivalent of an embargo, with a steep drop in trading activity seen between the two nations.

It also gives markets what they wanted: a deescalation. US futures markets surged higher in premarket trading.

"Neither side wants a decoupling," Treasury Secretary Scott Bessent said Monday morning to reporters after saying Sunday that the talks had yielded "substantial progress."

He added that the 90-day pause could also be extended, saying, "as long as there is good faith effort, engagement, and constructive dialogue, then we will keep moving forward."

The agreement was announced in a a joint statement from the two nations that suggesting alternating talks in China and the United States in the weeks ahead.

"The Parties will establish a mechanism to continue discussions about economic and trade relations," the statement added.

The closely watched talks stretched over two days, with Secretary Bessent and US Trade Representative Jamieson Greer representing the US side, and Chinese Vice Premier He Lifeng leading the talks from the Chinese side.

Chinese state-run media also published the joint statement on Monday and added that the talks had seen "major consensus [with] substantial progress during the talks."

Secretary Bessent then followed up Monday's announcement with a series of media appearances.

On CNBC, he confirmed that the aim is for more talks in the next few weeks as the two sides look for a "more fulsome agreement." On MSNBC, he added that the remaining 10% reciprocal tariffs on China represent "a floor" and that he didn't see a chance for more lowering on that front. On Bloomberg, he added it's now possible to imagine a call between Trump and Chinese President Xi Jinping in the coming weeks or months.

President Trump previously called the talks "a total reset" and helped open the door to deescalation in recent days.

He previously floated a possible 80% rate on the US side while hailing the progress in Switzerland with a post Saturday that it had been "a very good meeting today with China ... negotiated in a friendly, but constructive, manner."

A move 'toward resolving' tensions

This weekend's talks are expected to be the first in a drawn-out process of negotiations that will span an array of complex issues, from intellectual property to currency manipulation to steel “dumping” to semiconductors to agriculture to fentanyl.

Fentanyl was a key issue in this weekend's talks, with Bessent calling the issue the "upside surprise for me from this weekend." The Chinese sent a deputy minister to the talks to directly address the issue.

For now, the 20% duties that Trump imposed on China over fentanyl to begin his term will remain in place — which is why US duties are now moving to 30% compared to China's 10%.

Other sector-specific duties that the US imposed on China before Trump took office this year on "strategic sectors" like electric vehicles and steel are also remaining in place and are not changed by Monday's announcement, according to US officials.

In his own comments, Bessent added a key outstanding issue for him: "We have identified five or six strategic industries and supply chain vulnerabilities, and we will continue moving towards US independence or reliable supplies of allies on those."

It was a weekend that came after days of deescalation from Trump and his team and a weeks-long diplomatic dance in which both sides ratcheted up tariffs to an effective trade embargo and tried to position the other as more in need of a deal.

As recently as last Wednesday, Trump said that the US is "losing nothing" by not trading with Beijing and was also asked about the Chinese contention that the 145% tariff needed to be brought down before substantive negotiations could start and whether he was open to that, with the president simply answering, "No."

But his tone began to shift. By Thursday, Trump said regarding tariffs that, if this weekend's talks go well, "you know it's coming down." By Friday morning, he had opened the door to a lowering further posting that a lowering of tariffs to 80% "seems right."

Source:finance.yahoo

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