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

Economic

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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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Warren Takunda

China–U.S. Trade War

Economic

London stocks were still firmer by midday on Monday after the US and China agreed a temporary deal to cut tariffs.

The FTSE 100 was up 0.5% at 8,598.83 after the US and China agreed to significantly lower tariffs following a key agreement struck in Geneva over the weekend.

The world’s two largest economies will now cut levies for the next 90 days. Washington will reduce tariffs on Chinese goods to 30% from 145%, while Beijing will lower duties to 10% from 125%.

Speaking at a press conference in Geneva, US Treasury secretary Scott Bessent said: "We want more balanced trade, and I think both sides are committed to achieving that.

"Neither side wants to a decoupling."

He added that the two sides now had a "mechanism for continued talks".

In Beijing, China’s state broadcaster CCTV called the talks "candid, in-depth and constructive". Official media reports also noted that further discussions "on issues of mutual concern" were now expected.

Russ Mould, investment director at AJ Bell, said: "Markets have welcomed the tentative US-China trade agreement with open arms.

"While the trade spat has only been dialled back for 90 days, it’s a major breakthrough as far as investors are concerned. The fact the two countries were talking was already a major win given they’ve been at each other’s throats during the first and second Trump presidential terms.

"Some people thought the best-case outcome from the weekend’s discussions would be an agreement to simply keep talks going. Therefore, to have reached an initial deal so quickly and one that rolls back tariffs by a large amount is a pleasant surprise.

"The UK-US trade deal last week made it perfectly clear that Trump wasn’t going to get rid of tariffs completely. If one of its greatest allies is forced to still have a 10% base tariff, there is no way that tariffs on China would have disappeared completely upon a trade deal.

"Lowering tariffs on Chinese goods from 145% to 30% is a big deal and one that significantly lessens the blow to the Asian economy. As ever, it’s clear that these deals aren’t even sided. China is cutting duties on US imports from 125% to 10%. That’s the same percentage point reduction as on the other side of the coin, but the US is still subject to lower tariffs.

"The next 90 days are going to be crucial in determining the longer-term tariff levels between the two countries. It would only take China upsetting Trump once for him to rip up the 90-day deal and revert back to sky-high tariffs. China won’t want to come across as weak in any discussion and is certainly not a push-over, yet it will be cognisant of the situation’s fragility.

"Trump has shown he is willing to reduce the severity of the Liberation Day tariffs and that has raised hopes for other countries to secure more favourable trade deals. All this points to the potential for a less severe hit to global trade and lower fears of recession. That in turn has put investors in risk-on mode."

In equity markets, heavily-weighted miners were among the top performers, with Glencore, Anglo American, Antofagasta and Rio all higher.

4imprint was the standout gainer on the FTSE 250, having warned in March that tariffs could dent sales this year.

Shares in meat producer Cranswick plunged after Britain’s Big Four supermarkets all suspended supplies from its Northmoor Farm in Lincolnshire following reports of animal abuse.

Secret recordings obtained by the Mail on Sunday showed workers at the site engaging in inhumane practices, including piglet ‘thumping’ - a criminal offence whereby runts of the litter or sick piglets are killed by being violently hit against floors and walls. Botching killings of sows were also filmed, along with a number of other unnecessary acts that put pigs under distress and considerable pain.

Cranswick is the largest meat supplier to grocers in the UK, and Tesco, Sainsbury’s, Morrisons and Asda have all announced that they pulled supplies immediately following the revelations.

Victrex was also weaker after interim results, while AstraZeneca and Hikma Pharmaceuticals both fell after Trump said he would sign an executive order to cut drug prices.

Source: Sharecast

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Glendon

Economic

Forex

The trade agreement between the US and China marks a dramatic volte-face after weeks of simmering tensions. But don’t expect an equally breathtaking about turn from US consumers. Amid the uncertainty about economic growth, job cuts and inflation, it will take time for shoppers to regain their confidence. Even if they do, there are some reasons why the pain for retailers and consumer goods groups may be prolonged.

Monday’s announcement means the combined 145% US levies on most Chinese imports will decline to 30% by May 14. The new, lower rate is still unhelpful, but it’s a lot better than the threatened levy, which would have made some products, including toys and Christmas decorations, simply uneconomic to sell.

Retailers, suppliers and consumers will still have to share some pain. For Americans, that means some level of price inflation on the mostly non-food items that come from China. Take clothing, for example. At 145%, retail prices for the mid-market knitwear and coats that are typically manufactured in China may have had to increase by 20% to 30%. Price hikes should now be less.

The accord should encourage retailers to restart paused orders, or ship goods they’ve been holding in China in anticipation that a deal would be reached. Even before Monday’s announcement there were signs that trade had begun to pick up; that should mean fewer gaps on shelves this holiday season.

But the disruption will take time to work its way out of the system. Take toys. Many should have been manufactured by now. Even if production restarts immediately, Santa might not be bringing some items. The bigger risk is a tsunami of goods arriving in mid-market department stores when they’re no longer welcome; heavier-weight spring jackets and knitwear, for example, after temperatures have already risen as summer approaches.

This is exactly what happened in 2022, when supply chain snarl ups in the approach to the 2021 holiday season led to loungewear and small appliances landing six months later, when consumers had already moved on. This led to a mountain of inventory that stores were forced to discount. If the same happens now, it will test the resolve of retailers to resist markdowns.

It doesn’t help that consumers have rushed to purchase over the past few months in anticipation of higher prices. Cars were the favorite target of those seeking to beat the hikes. But Americans also shopped for home furnishings, electronics, clothing and footwear. Big, expensive, purchases like a car or sofa won’t be repeated, and may sap the funds available for other types of outlay.

When it comes to clothing, shoppers typically spend to a budget. If they’ve bought sneakers or a patchwork quilted jacket already, many won’t buy again.

Some US consumers may be reluctant to splurge for a different reason: they still feel nervous about a recession. Across the income spectrum, it’s clear that many are cutting back. The most pressed are already acting as if the worst is here: for example, reusing cooking oil one more time.

But the more affluent are feeling the pinch, too. McDonald’s Corp. said the pressure from inflation and interest rates that’s been hurting poorer Americans for the past few years was now “spilling over” into middle-income customers. On Friday, for example, Sweetgreen Inc. cut its annual guidance; clearly $16 salads are off the menu. Chief Financial Officer Mitch Reback said same-store sales were positive in March, but turned negative in April “coinciding with the tariff announcements.” He told Bloomberg News that April has traditionally been a month when the chain’s performance picks up as temperatures rise; “this is the first time we haven’t seen that lift.”

US luxury goods demand has also weakened, according to Citigroup Inc.’s monthly credit card data, turning negative in February, March and April after recovering in December and January. While the S&P 500 has bounced back from its so-called “Liberation Day” lows, we splurge on a Gucci handbag or Rolex watch when we feel wealthy and upbeat about life. After the dislocation, it will take time for any feel-good factor to return.

Meanwhile, the accord with China is only temporary, and let’s not forget that levies on other important manufacturing nations, such as Vietnam, are only paused rather than being completely off the table. An escalation of the trade war may have been averted. Not so the tariff whiplash for consumers.

Source: Bloomberg Europe

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Gerik

Economic

China–U.S. Trade War

Markets Respond Strongly to U.S.–China Tariff Agreement

On May 12, the United States and China jointly confirmed a significant step toward de-escalating their trade dispute. The two sides agreed to suspend additional tariffs for 90 days while committing to sharply reduce existing tariff levels. According to U.S. Treasury Secretary Scott Bessent, both countries would lower their respective trade taxes by a combined 115 percentage points. This announcement was followed by a pledge from China’s Ministry of Commerce to reverse all non-tariff retaliatory measures that had been in effect since April 2, provided both sides act before May 14.

This move was widely interpreted as a constructive signal to the global investment community, indicating a potential thaw in relations between the world’s two largest economies. As markets digested the news, optimism translated swiftly into tangible asset movements.

Surging Stock Indexes and Currency Strength Reflect Investor Relief

The announcement triggered a broad-based rally in global equities and foreign exchange. U.S. equity futures jumped across all major indexes. The S&P 500 futures gained 2.8 percent, Nasdaq 100 futures rose 3.6 percent, and Dow Jones futures added 2.3 percent. The renminbi also responded sharply. The onshore yuan reached 7.2001 to the dollar, its strongest position since November 2024, while the offshore yuan appreciated by 0.4 percent.

Bond markets mirrored this momentum. The yield on the 10-year U.S. Treasury climbed to 4.447 percent during European trading hours, the highest level in a month and a notable jump from the 4.15 percent yield registered before April’s tariff announcement.

In Europe, logistics and shipping firms saw dramatic stock gains. Shares in Maersk soared nearly 12 percent, Hapag-Lloyd climbed more than 10 percent, and Kuehne+Nagel rose over 6 percent, reflecting renewed confidence in global trade volume recovery.

Analyst Reactions Show Optimism Tempered by Structural Doubts

Financial experts and market strategists offered a spectrum of interpretations. Kenneth Broux, senior strategist at Societe Generale, described the market rally as a sign of support for risk assets and a step in the right direction for investor sentiment. He also observed that the U.S. dollar, having lagged behind equities and bonds during the recent downturn, might now be positioned for a near-term rebound. Zhiwei Zhang, chief economist at Pinpoint Asset Management in Hong Kong, noted that the outcome exceeded expectations, suggesting a positive impact for both economies and the global financial system. However, he also emphasized that the tax reductions are temporary and limited to a 90-day window, cautioning against premature celebrations.

Arne Petimezas of AFS Group in Amsterdam found the policy shift abrupt, remarking on how rapidly President Trump rolled back aggressive tariff measures. William Xin, chairman of Spring Mountain Investment in Shanghai, interpreted the announcement as a strong indicator that investors could expect further gains in Chinese equities and currency in the near term. Still, Jan von Gerich of Nordea warned that underlying volatility remains, and that the market should not treat short-term headlines as indicators of long-term policy consistency. Jane Foley, FX strategist at Rabobank in London, echoed this view, underlining that the 10 percent base tariff level remains in place and that central banks are still facing significant uncertainty in adjusting policy to account for trade-related risks.

A Temporary Pause in Conflict, Not a Final Resolution

Although the announcement brought much-needed relief to jittery markets, the underlying geopolitical and structural tensions persist. The 90-day truce provides only a narrow window for negotiators to address deeply rooted issues ranging from trade imbalances to industrial policy and currency stability. The history of U.S.–China trade negotiations suggests that enthusiasm can quickly give way to renewed confrontation, especially without clear enforcement mechanisms or defined end goals.

While the suspension of tariffs and corresponding tax cuts may support short-term economic stability, only sustained diplomatic engagement and transparent commitments will determine whether this is a breakthrough or merely an intermission. Investors and central banks alike will continue to watch closely, knowing that the timeline is tight and the stakes remain high.

Source: Reuters

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Michelle

Economic

Stocks

U.S. President Donald Trump said he will push to cut prescription drug prices by 59%, but gave no further details about his plan to lower medicine costs ahead of a health-related event at the White House later on Monday.

On Sunday, Trump said he would sign an executive order to pursue what is known as "most favored nation" pricing or international reference pricing. The Republican president previously tried to implement such a program during his first term in office but was blocked by the courts.

"Drug prices to be cut by 59%" Trump wrote on Monday in capital letters on his social media platform as global pharma shares traded lower. Shares of U.S. drugmakers fell between 2% and 3% following his weekend comments before Trump's latest post Monday morning.

Trump is scheduled to hold an event at the White House with U.S. Health Secretary Robert F. Kennedy Jr. at 9:30 a.m. (1330 GMT)

Drugmakers have been expecting an order focusing on the federal Medicare health insurance program for people aged 65 and older and the disabled, according to four drug industry lobbyists who said they had been briefed by the White House.

Reuters previously reported such a policy was under consideration.

The United States pays the highest prices for prescription drugs, often nearly three times more than other developed nations. Trump has pledged to close the gap but not detailed how he will implement it.

Source: Reuters

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Gerik

China–U.S. Trade War

Economic

Tariff Reductions Mark Turning Point in Prolonged Conflict

At high-level negotiations in Geneva, both the United States and China reached a consensus to mutually slash punitive tariffs within the next 90 days. According to the Financial Times, the U.S. will reduce its tariff on Chinese goods from 145% down to 30%, while China will cut its retaliatory tariff on American products from 125% to 10%. The agreement represents a major turning point in a conflict that has destabilized global markets and strained diplomatic ties for months.

This move follows a tense standoff that began in April 2025, when the U.S. imposed sweeping tariffs on Chinese imports. China immediately retaliated, triggering a tit-for-tat trade war that disrupted supply chains, drove inflation, and suppressed investor confidence.

Diplomatic Language Hints at Strategic Calculations

U.S. Treasury Secretary Scott Bessent characterized the Geneva talks as “strong and effective,” emphasizing that neither side seeks to sever economic ties. A joint statement confirmed plans to establish a formal mechanism for ongoing dialogue on economic and trade relations, a structural feature absent in prior rounds of trade engagement.

Although the White House labeled this outcome a “trade deal,” details remain sparse. Both sides refrained from publishing specific timelines, implementation frameworks, or benchmarks to evaluate progress—raising questions about how durable the commitments may be.

Market Reactions Reflect Relief, But Not Euphoria

Global markets responded positively, albeit cautiously. Chinese equity markets rebounded, recovering much of the ground lost since the U.S. tariffs took effect on April 2. Investor sentiment appears bolstered by the perception that an uncontrolled escalation may now be averted.

However, U.S. Trade Representative Jamieson Greer reiterated that Washington still seeks a more balanced trade relationship, hinting that future negotiations will likely focus on structural issues, such as industrial subsidies, IP enforcement, and state-owned enterprise practices—long-standing friction points in U.S.-China relations.

Historical Caution and Credibility Gaps Persist

Analysts remain skeptical due to the checkered history of trade truces between the two powers. In 2018–2020, a similar agreement—known as the Phase One deal—collapsed after the U.S. accused China of failing to meet its purchase obligations, especially during the pandemic. That failure laid the groundwork for the current escalation, further eroding trust.

China's demand for a full removal of all 2025-imposed tariffs reportedly clashed with the U.S. objective of retaining leverage to manage the bilateral trade deficit. The resulting compromise, while significant, falls short of a full resolution and may serve more as a ceasefire than a peace treaty.

Progress Without Resolution

The Geneva agreement offers relief from rising economic tension, but its durability depends on execution and political will. With both economies facing slowing growth and global inflation risks, this détente is as much about pragmatism as it is about principle.

Still, without transparent enforcement mechanisms or detailed roadmaps, the risk of renewed confrontation remains high. The next 90 days will be critical in determining whether this is a genuine reset—or just a temporary pause in a protracted geopolitical rivalry.

Source: FT

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Gerik

China–U.S. Trade War

Economic

China's Mounting Costs: From Export Declines to Structural Strains

Beijing has become the focal point of the Trump administration’s aggressive protectionist agenda, with the recent 145% U.S. tariff targeting Chinese goods sparking a retaliatory 125% duty on American imports. The impact on China has been pronounced. Major export sectors—particularly electric vehicles and green technology—are facing plummeting demand as not just the U.S., but also Europe and Canada implement import restrictions.

Despite a stronger-than-expected 5.4% GDP growth in Q1 2025, this momentum masks deeper structural weaknesses. Industrial output is already slipping, while long-standing issues like industrial overcapacity, an aging population, youth unemployment, and a crisis-ridden real estate sector continue to weigh heavily. The manufacturing sector, once China’s growth engine, is now strained by external volatility and internal inefficiencies.

Politically, Beijing has taken a firm stance. A Ministry of Foreign Affairs video titled “Never Yield” released on April 29 underlines China’s unwillingness to bow to U.S. pressure, even as it signals openness to dialogue under conditions of reciprocity.

The U.S. Pays a Steep Price: Agriculture, Manufacturing, and Consumers Hit

Although initiated with the goal of narrowing trade deficits and reviving domestic manufacturing, the U.S. economy is suffering broad collateral damage. The U.S. Chamber of Commerce estimates that, as of April 2025, tariff-related economic losses have exceeded $360 billion. In agriculture, exports to China dropped by 47% year-on-year in Q1, wiping out over $12 billion in value for farmers across the Midwest.

Manufacturing has also seen a contraction, with the National Association of Manufacturers reporting over 120,000 job losses since early April. The high-tech sector, heavily reliant on Chinese components, is experiencing its slowest quarterly growth in seven years. Simultaneously, consumer confidence has declined for three consecutive months, as inflation and higher import costs weigh on household budgets.

If the trade war persists through mid-2025, economists warn that the U.S. could enter a technical recession by Q3—making the domestic political cost of continued escalation even higher.

Global Fallout: The Resurgence of Regionalism and the Kindleberger Trap

Beyond bilateral damage, the U.S.–China tariff war is undermining multilateral trade frameworks. The sidelining of the World Trade Organization (WTO) and the rise of unilateral measures are emboldening protectionist tendencies globally. In response, regional blocs are gaining momentum:

RCEP, led by China, is emerging as Asia’s default economic framework.

CPTPP continues to expand, with the UK recently joining.

Latin American alliances are strengthening to buffer external shocks.

Yet, while regional frameworks offer partial stability, they lack the scale, inclusivity, and dispute resolution capacity of the global trade system. Fragmentation threatens efficiency and heightens systemic risk.

Most critically, the absence of a stabilizing hegemon echoes Charles Kindleberger’s diagnosis of the Great Depression: without a global leader to provide public goods and coordinate policy, the international system veers toward disarray.

A Trade War with No Victor, Only Systemic Risk

The U.S.–China trade war is a sobering case study in mutual loss. Both economies are bleeding through disrupted supply chains, weakened industries, and inflamed nationalist sentiment. Meanwhile, the global trading system is eroding under the weight of unilateralism and distrust.

If neither Washington nor Beijing steps up to rebuild cooperative norms, the world may slide further into economic fragmentation—and possibly, geopolitical confrontation.