US, China Agree To Temporary Tariff Cuts For 3 Months In Bid To Ease Trade Tensions

The United States and China have agreed to temporarily reduce tariffs on each other's goods, according to a joint statement released on Monday, in a bid to ease trade tensions and allow three more months for negotiations between the world's two largest economies.

Under the agreement, the combined 145% US tariffs on most Chinese imports-including those linked to fentanyl-will be lowered to 30% by May 14.

Photo Credit: AP/PTI

Meanwhile, China will reduce its 125% duties on American products to 10%, officials confirmed during a briefing in Geneva.

"We're united in the view that neither side is seeking decoupling," said US Treasury Secretary Scott Bessent, who also noted a "very robust and productive" discussion on tackling fentanyl. He hinted that negotiations could result in "purchasing agreements" by China.

Bessent clarified that the cuts announced do not affect broader sectoral tariffs that apply to all US trade partners, and the Trump-era tariffs on Chinese goods remain unchanged.

The announcement triggered a positive reaction across global financial markets. Asian and European stock indices rose, S&P 500 futures jumped 3%, oil prices climbed, US Treasury yields increased, and the dollar strengthened. The offshore yuan also gained approximately 0.5% against the US dollar.

The US statement further elaborated that the two nations will establish a framework for ongoing dialogue on economic and trade relations.

China's response

According to the official Xinhua News Agency, citing a national security white paper, China has consistently managed its relationship with the US based on mutual respect.

It reaffirmed its commitment to fostering stable ties with the US and stressed that "pressure and threats are not effective approaches" when dealing with Beijing.

The move marks a step towards defusing a tariff war that has significantly disrupted trade across the Pacific. Talks had previously been described as making "substantial progress," boosting investor confidence and helping Chinese shares recover from losses following President Donald Trump's April 2 "Liberation Day" tariff declaration.

US Trade Representative Jamieson Greer stated the US is aiming for a more balanced trade relationship with China, saying, "our Chinese counterparts clearly came ready to engage this week."

The White House initially labelled the arrangement a "trade deal" in a Sunday statement, though questions remain over what would be a mutually acceptable outcome and the timeline for achieving it. China had earlier demanded the removal of all tariffs imposed in 2025, a position at odds with the US aim to reduce or eliminate its trade deficit.

Despite recent optimism, past experience suggests that finalising a comprehensive deal could prove lengthy. In 2018, the two countries paused their dispute following talks, only for negotiations to collapse and lead to more than 18 months of tariff escalations before the "Phase One" agreement was signed in January 2020.

That deal ultimately fell short of its targets, with China failing to meet its purchase commitments. During the pandemic, the US trade deficit with China widened, laying the groundwork for the renewed trade war.