US, China slash tariffs for 90 days in de-escalation of trade war

Singapore: The US and China have brokered a deal to slash eye-watering tariffs on each other for 90 days in a bid to defuse a trade showdown between the world’s two biggest economies that has rattled financial markets and revived fears of a global recession.

The temporary agreement, which was secured during two days of talks between Chinese and US officials in Geneva, Switzerland, over the weekend, will cut US levies on Chinese imports to 30 per cent from 145 per cent by Wednesday. Beijing has agreed in turn to reduce its 125 per cent tariffs on US goods to 10 per cent by the same deadline.

US President Donald Trump and Chinese leader Xi Jinping.Credit: Age & SMH

The revised measures were announced in a statement released by both sides on Monday, which pledged that the parties would “establish a mechanism to continue discussions about economic and trade relations”.

Speaking at a press conference in Geneva, US Treasury secretary Scott Bessent, who led the American negotiations, said, “the consensus from both delegations is that neither side wanted a decoupling”.

“And what had occurred with these very high tariffs ... was the equivalent of an embargo, and neither side wants that. We do want trade.”

He said the two sides had a robust discussion on China’s role in the fentanyl trade, which was the pretext for US President Donald Trump’s initial 20 per cent tariffs on Chinese imports. That levy remains in place, on top of the baseline 10 per cent tariff temporarily adopted by both sides.

The Chinese Commerce Ministry said the talks were “candid, in-depth and constructive” – the same words used a day earlier by Chinese Vice Premier He Lifeng, who attended the talks as Beijing’s most senior trade official.

The Chinese statement said it hoped the US would continue to work with China to “jointly inject more certainty and stability into the world economy”.

The meeting marked the first talks between the two sides since the trade war escalated on April 2, when Trump unveiled sweeping tariffs on all the US’s trading partners before later suspending them for 90 days for every country except China.

Beijing retaliated with its own tariff package on US goods, which spiralled into a tit-for-tat feud until both sides had eclipsed 100 per cent, in effect destroying $US600 billion ($936 billion) of two-way trade between the countries.

The outcome, though temporary, represents a more substantial retreat from the brink than many were expecting. Ahead of the talks, Trump floated a tariff figure of 80 per cent on Chinese goods as one that “seems right”.

The reprieve gives the superpower rivals three months to conclude a longer-lasting deal. However, it remains unclear exactly what demands the Trump administration will seek, and what concessions Beijing, which began the year signalling its desire to negotiate, will want to extract in return.

ANZ’s chief economist for China, Raymond Yeung, said the bank expected trade discussions would proceed over the next month, with the US driven to engage by the approach of its debt ceiling by mid-July.

“We believe both sides will focus on setting up a trade template, and a final deal will be
reached before the US’s 2026 mid-term election,” he said in a research note.

Shares in China and US stock futures rallied on the news, along with both countries’ currencies.

“The result far exceeds market expectations. Previously, the hope was just that the two sides can sit down to talk, and the market had been very fragile,” said William Xin, chairman of hedge fund Spring Mountain Pu Jiang Investment Management in Shanghai.

“Now there’s more certainty. Both China stocks and the yuan will be in an upswing for a while.”

with Reuters

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