New China Trade Deal with USA
On May 12, 2025,
The United States and China announced a significant de-escalation in their ongoing trade war by agreeing to a 90-day reduction in tariffs. This agreement, reached during high-level negotiations in Geneva, aims to provide temporary relief to global markets and set the stage for more comprehensive trade discussions.
US-China Tariffs Negotiation: Top American officials involved in trade negotiations with China emerged from two days of talks and confirmed that a deal between the two countries had been reached, which could have big repercussions for the global economy. “I’m happy to report that we’ve made substantial progress between the United States and China in the very important trade talks,” US Treasury Secretary Scott Bessent said in a statement Sunday in Geneva, where the talks were being held. US Trade Representative Jamieson Greer indicated that an agreement had been reached Sunday. Bessent and China’s vice-premier He Lifeng had been engaged in closed-door discussions over this entire weekend, in the first meeting since US President Donald Trump slapped steep tariffs against China. Vice Premier Lifeng said the talks were “in-depth” and “candid”.
The Treasury Secretary had suggested earlier this week that his goal was de-escalation of tensions as the US and China have been at a stalemate since Trump rolled out his tariff policy. In the unfolding “Mexican stand-off” between the US and China, what was increasingly becoming clear was that both sides wanted to break the stalemate.
Key Details of the Agreement
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Tariff Reductions: The U.S. will lower its tariffs on Chinese goods from 145% to 30%, while China will reduce its tariffs on U.S. imports from 125% to 10%
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Non-Tariff Measures: China has committed to suspending or canceling non-tariff measures previously imposed on U.S. goods.
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Duration: The tariff reductions are set for an initial period of 90 days, during which further negotiations are expected to take place .
Political and Economic Implications
U.S. Treasury Secretary Scott Bessent emphasized that while the agreement provides short-term relief, more complex negotiations remain ahead. He also indicated a shift in U.S. policy towards reducing reliance on Chinese manufacturing .
President Trump described the deal as a "total reset" in trade relations and expressed optimism about potentially speaking with Chinese President Xi Jinping later in the week.
The agreement also includes provisions for ongoing discussions on critical issues such as intellectual property rights and the flow of fentanyl precursors, signaling a potential shift toward a more stable and cooperative economic relationship.
While this temporary truce offers a reprieve from escalating trade tensions, both sides acknowledge that underlying issues remain unresolved. The next 90 days will be crucial in determining whether a more permanent and comprehensive trade agreement can be achieved.
Market Reactions
The announcement had an immediate positive impact on global financial markets:
U.S. Markets: The S&P 500 and Nasdaq indices surged by 2.9% and 4.1%, respectively, reflecting investor optimism .
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Asian Markets: Asian equities also experienced gains, with notable increases in tech stocks such as Nvidia, Meta, and Tesla
Currency and Commodities: The U.S. dollar strengthened, and crude oil prices rose over 3%, indicating broader economic confidence .
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