On Monday, the United States and China reached a deal to cut 90-day high-priced tariffs. Although both sides claimed they could withstand a prolonged trade war, their truce was faster than many analysts expected.
The breakthrough marks the dramatic diminishing of trade tensions following U.S. President Donald Trump’s tariff war in the April 2 “Liberation Day” announcement.
Trump initially announced so-called reciprocity tariffs in dozens of countries before suspending them a week later. However, China has not been disconnected from the hook, and Beijing soon retaliated with its own tariffs.
Tit-for-Tat quickly exchanged for shocking sums. By April 11, tariffs on Chinese goods entering the United States had reached 145%, and the U.S. taxes on Chinese products had expanded to 125%.
Last weekend, U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier Lifefeng agreed to a ceasefire that would cut corresponding tariffs by 115 percentage points within three months, which was the boiling point last weekend.
Now, U.S. tariffs on Chinese products will now drop to 30%, while Chinese tariffs on U.S. goods will drop to 10%. The stock market announced the news, with the Nasdaq comprehensive grocery store climbing 4.3% on Monday, up 20% from its April lows.
But a key question has a significant impact on the coming trade talks: Did Washington or Beijing retreat in the first place?
The tariff moratorium was larger than analysts expected after two days of trade talks in Geneva, Switzerland. On Monday, the United States and China issued a joint statement announcing the deal.
The two countries recognize the importance of their "bilateral economic and trade relations" and the importance of "sustainable, long-term and mutually beneficial economic and trade relations".
The United States and China agreed to establish a mechanism to continue discussing trade relations. China also agreed to "suspend or cancel" non-tariff measures against the United States, but provided no details.
When he spoke to a reporter in Geneva last weekend, his deputy prime minister called the speech “candal, in-depth and constructive.”
"Both sides agree that we don't want publicity," U.S. Treasury Secretary Bessent told Bloomberg Television on Monday.
"The U.S. will strategically decouple based on what we found during Covid, which is in national security interests - whether it is semiconductors, medicine, steel," Bessent said.
After the negotiations, Trump called the negotiations a "great trade agreement" and added: "We don't want to hurt China." He then claimed he had won a personal victory, saying he had made a "complete reset" with Beijing.
Elsewhere, Hu Xijin, a former editor of China's state-run Global Times publication, said on social media that the deal "a huge victory for China."
After announcing the tariff pause, Best said, "incredible" that China's mutual tariffs will be below 10%. But, he said, the April 2 level set by President Trump is 34% - will be the ceiling.
"We can see some fentanyl tariffs … stand out." Earlier this year, Trump imposed a 20% tariff on China, accusing it of not doing enough to prevent fentanyl, a highly addictive and deadly opioid, from entering the United States.
Currently, Chinese goods will continue to face 30% tariffs. In addition, in recent years, specific products from China, such as electric vehicles, steel and aluminum.
On Monday, the White House also issued an executive order to reduce responsibilities Low value package - Items priced up to $800 - China from 120% to 54%.
While the minimum fees for packages from e-commerce sites Temu and Shein will remain in place, the plan is planned to increase to $200 on June 1.
On the other hand, Beijing has pledged to suspend forms of retaliation in non-tariff forms implemented since April 2, such as export restrictions on key minerals used by U.S. manufacturers in high-tech equipment and clean energy technologies.
It is worth noting that the deal does not include Beijing’s offers to several key points in the United States, such as its huge trade surplus with the United States or its exchange rate policy, and China is accused of artificially reducing it to increase export sales.
The tariff suspension will last for 90 days. They will be reviewed under extensive negotiations in the coming weeks and months.
The speed at which the U.S. and China lifted tariffs surprised many analysts, suggesting that the trade war was causing pain on both sides.
Tariffs are threatening job losses for Chinese factory workers, higher inflation and empty shelves for U.S. consumers.
But for Piergiuseppe Fortunato, an adjunct professor of economics at the University of Neuchatel in Switzerland, it is clear who wants the deal more.
"First of all, the United States has made more concessions than China. Secondly, the current unstable U.S. economy is more dependent on China's economy than China."
In April, the International Monetary Fund warned that the U.S. economy is at risk of a recession as Trump’s trade war and accompanying consumer prices rise, which could release a “significant slowdown.”
"Beijing is not a volatile location. For example, take the latest export figures as an example."
China's exports rose sharply in April. The strong performance increased by 8.2% from the previous year as Chinese companies moved trade to Southeast Asia, Europe and other destinations.
“I think Washington exaggerated its hand with Beijing,” Forato said.
“The White House overestimated the importance of the U.S. market and China has underestimated its success in diversifying exports from the U.S. since the first Trump trade war in 2018.”
"Even if possible, it can take a long time to reach a detailed agreement."
In 2018, the United States withdrew from a potential trade deal after the United States held talks with Beijing. The next 18 months, a tariff exchange before a Phase 1 transaction was signed in January 2020.
However, China does not comply with all terms of the purchase agreement. It lowered 43% of the $200 billion worth of goods it agreed to buy from the U.S. by 2021.
The U.S.-China trade deficit then jumped around during the 19th pandemic, laying the foundation for the current trade war.
Earlier this week, Bessent once again suggested that Washington might be looking for the type of “buy agreement” characterized by phase one transactions.
"The voice from the U.S. may get more purchase agreements. But the U.S. economy was hit by a similar arrangement last time," Fornato said.
During Trump's first trade war with China, the U.S.-China Business Council estimates that 245,000 U.S. jobs were lost.
Since the tariffs are also larger today, even after the announcement last weekend, it can be assumed that more jobs will be laid off.
In the future, Fortunato suspects that the U.S. will "average tariff rate of 15-20%, and even higher tariff rates in China. That's five times that of January... It's a huge change."