U.S. and China Reach Agreement to Cut Tariffs for 90 Days

The world’s two largest economies, the United States and China, have agreed to temporarily reduce mutual trade duties, according to a joint statement released in Geneva. The decision aims to ease trade tensions and provides both parties with additional time to resolve existing differences.Aggregate U.S. tariffs on most Chinese goods will be significantly reduced, including tariffs related to fentanyl, in the coming weeks. In response, Chinese tariffs on U.S. goods will also be substantially lowered. These changes were confirmed in the joint statement and by officials at a briefing on Monday.“We had a very informative and productive discussion about the next steps on fentanyl,” U.S. Treasury Secretary Scott Bessent said. “We are in agreement that neither side seeks to separate our economies.” The statement also noted that both sides will establish a mechanism to continue discussions on economic and trade relations.A step toward de-escalationThe announcement marks a significant step toward de-escalating the tariff war, which has caused a sharp decline in trade across the Pacific. Previously, both countries reported substantial progress in the talks, which positively impacted markets and helped Chinese stocks recover losses incurred after President Trump announced new tariffs in early April. U.S. Trade Representative Jamieson Greer stated that the United States is seeking a more balanced trade relationship with China.The White House initially referred to the agreement as a “trade deal” in its statement in mid-May, but it remains unclear what specific goals are acceptable to both sides and how long it will take to achieve them. China has previously demanded that the U.S. eliminate all tariffs imposed this year, a stance that conflicts with the American objective of reducing or eliminating the trade deficit.Historical contextDespite the markets’ positive reaction to reports of progress, historical experience shows that reaching a detailed agreement can take a long time-if it happens at all. In a previous episode, the parties also agreed to suspend their dispute after a round of negotiations, but the U.S. soon withdrew from that agreement, leading to an extended period of additional tariffs and negotiations before a partial trade deal was signed.As a result, China did not meet the procurement commitments of that agreement, and the U.S. trade deficit with China grew during the pandemic, setting the stage for the current trade war.The current agreement to reduce tariffs gives both sides an opportunity to reevaluate their positions and seek a long-term solution to trade disagreements. Developments over the coming months may determine the future of economic relations between the world’s two largest economies.Kraken: Best crypto exchange for security & reliabilityBuy, sell, and trade 400+ cryptocurrencies with industry-leading securitySpot, Futures & Margin trading – leverage up to 5x for advanced tradersEarn rewards with staking on top cryptocurrencies24/7 customer support and high liquidity for fast tradesRegulated in the US with strong compliance and security measures13+ million users worldwideGet Started on Kraken