Credit: CFP

AsianFin-- The United States and China have agreed to suspend the majority of tariffs for 90 days, signaling a significant thaw in trade tensions that have rattled global markets for months.

U.S. Treasury Secretary Scott Bessent, who led the American delegation in weekend negotiations, confirmed that both sides committed to sharp tariff reductions.

Under the agreement, U.S. tariffs on most Chinese goods will be cut from 145% to 30%, while China will lower its tariffs from 125% to 10%, according to a joint statement released Monday.

"There's clear agreement from both sides: no one wants economic decoupling," Bessent said. "The extreme tariffs had effectively created an embargo. Both sides now want to restore normal trade flows."

The tariff rollback will remain in place for 90 days as negotiations continue. President Donald Trump told reporters he plans to speak with Chinese President Xi Jinping later this week to build on the momentum.

The dramatic scope of the tariff cuts sent U.S. equity markets soaring. Shares of major tech companies that had borne the brunt of the trade war, including Amazon, Apple, and Tesla, surged on the news.

The agreement comes amid growing hopes for a broader realignment in U.S. trade policy. Last week, Trump secured a new trade deal with the United Kingdom — his administration's first since the implementation and subsequent pause of sweeping "reciprocal" tariffs introduced in early April.

The U.S.-China trade dispute intensified in April 2025, when the U.S. imposed a sweeping set of "reciprocal tariffs" on nearly all Chinese imports, hiking rates as high as 145%. The measures were framed by the Trump administration as necessary to counteract what it called "unfair trade practices and economic coercion" by Beijing. China responded with proportional countermeasures, raising its own tariffs to 125% on a wide range of U.S. goods, including agriculture, semiconductors, and automobiles.

Credit: Yahoo Finance

These actions sparked fears of a full-blown trade war reminiscent of 2018–2019, when earlier rounds of tariff retaliation rattled global markets and disrupted investment flows. This time, however, the backlash was swifter and more pronounced, with U.S. multinationals, domestic manufacturers, and consumer advocacy groups warning of inflationary pressure and weakened economic competitiveness.

Multiple factors contributed to the U.S. decision to compromise. Firstly, pressure from domestic industries grew intense after the "reciprocal tariffs" led to soaring input costs, eroding profit margins and complicating supply chains. Secondly, global allies such as the EU and Japan criticized the unilateral approach, urging Washington to return to multilateral dialogue.

More significantly, the Biden and Trump administrations appear to be recalibrating their China strategy amid signs that Beijing's push for technological self-reliance — especially in semiconductors and clean energy — has gained speed under pressure. "We've seen that extreme tariffs are pushing China to accelerate domestic innovation, not slow it down," one senior U.S. official noted privately. "A smarter approach is needed."

Treasury Secretary Bessent echoed this view, saying, "What had occurred was the equivalent of an embargo, and neither side wants that. We do want trade."

China's Ministry of Commerce said Monday that recent high-level economic and trade negotiations with the United States have delivered meaningful progress, culminating in a significant reduction in tariffs on both sides.

According to a ministry spokesperson, the U.S. has agreed to eliminate 91% of its additional tariffs on Chinese goods, with China reciprocating by canceling 91% of its own retaliatory duties. Additionally, both countries have agreed to suspend the implementation of a 24% "reciprocal tariff" that had been previously planned.

The spokesperson noted that this outcome reflects the expectations of producers and consumers in both nations and serves the broader interests of global economic stability. "We hope the U.S. will continue to cooperate with China in the spirit of mutual understanding, correct its misguided policy of unilateral tariff hikes, and enhance mutually beneficial cooperation," the spokesperson said. The aim is to ensure the healthy, stable, and sustainable development of bilateral trade and to contribute to greater global economic certainty.

Since April 2025, the U.S. had imposed a series of escalating "reciprocal tariffs" on Chinese goods, raising rates from 34% to as high as 125%, following earlier unilateral tariff increases. China responded with firm and lawful countermeasures. These actions severely disrupted trade flows and destabilized the global economic order, the ministry stated.

The latest agreement marks a turning point, signaling a shared commitment to resolving disputes through dialogue. Both sides emphasized the strategic importance of building a long-term, stable, and mutually beneficial economic relationship—not only for their own economies but for the world at large.

To support ongoing dialogue, China and the U.S. will establish a dedicated consultation mechanism for economic and trade issues. The two sides will hold regular or ad hoc meetings, alternating between China, the U.S., or other mutually agreed locations. They will also conduct working-level discussions on specific issues as necessary, the spokesperson added.

The tariff truce has buoyed investor sentiment, sending U.S. stock markets sharply higher. But analysts caution that the 90-day reprieve is just a temporary fix.

"This is a tactical retreat, not a strategic realignment," said Mei Lin, a senior analyst at Eurasia Group. "Washington is trying to buy time while reassessing how best to compete with China — not just in trade, but in AI, chips, and green tech."

Both countries have agreed to establish a formal consultation mechanism to maintain regular dialogue, either bilaterally or in neutral venues. While structural differences over subsidies, IP protection, and industrial policy remain unresolved, the tone of diplomacy has shifted notably toward pragmatism.

If successful, the talks could lay the groundwork for a new phase of managed competition — one that accepts rivalry while promoting stability. For now, the world will watch closely as two of its largest economies test whether cooperation can coexist with strategic distrust.