U.S. and China agree to slash tariffs in 90-day trade war truce

By isabelle // 2025-05-12

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The U.S. and China agreed to a 90-day reduction in reciprocal tariffs, easing economic tensions and sparking a global stock rally.
U.S. tariffs on Chinese imports will drop from 145% to 30%, while China lowers duties on American goods from 125% to 10%.
President Trump called the deal a "total reset," though key issues like pre-existing tariffs and China’s rare earth export restrictions remain unresolved.
China agreed to curb fentanyl precursor exports, a major U.S. demand, in exchange for potential tariff relief.
The deal offers a political win for Trump but leaves deep trade disputes unsettled, with a tight 90-day window for further negotiations.

In a significant de-escalation of economic hostilities, the U.S. and China announced a temporary 90-day reduction in reciprocal tariffs, marking a potential turning point in a trade war that has rattled global markets. The agreement, reached during high-level talks in Geneva, will see U.S. tariffs on Chinese imports drop from 145% to 30%, while China will lower its duties on American goods from 125% to 10%. The move sparked an immediate rally in global stocks and strengthened the U.S. dollar, offering relief to businesses and investors who feared prolonged economic disruption. President Trump hailed the deal as a "total reset" in U.S.-China relations, signaling a shift from weeks of escalating tensions. Treasury Secretary Scott Bessent, who led negotiations alongside U.S. Trade Representative Jamieson Greer, emphasized that neither side wanted a full economic "decoupling," despite recent punitive measures. "And what had occurred with these very high tariffs... was the equivalent of an embargo, and neither side wants that," Bessent said.

A temporary truce with long-term implications

The agreement pauses but does not eliminate the tit-for-tat tariffs imposed since early April, when Trump’s "Liberation Day" announcement triggered a wave of retaliatory measures. While the 90-day reprieve offers breathing room, key structural issues remain unresolved. The U.S. retains pre-existing tariffs on Chinese goods, including 25% duties on industrial products and 100% levies on electric vehicles. Similarly, China’s export restrictions on rare earth minerals—critical for U.S. tech and defense industries—remain in place, though Beijing pledged to roll back some non-tariff barriers. Market analysts welcomed the news but cautioned against over-optimism. "This pause gives U.S. companies more time to adapt and plan for contingencies should the trade talks go sideways again," said Jamie Cox of Harris Financial Group. The S&P 500 surged 3%, while the Nasdaq jumped 4%, reflecting investor relief. However, Patrick Kaser of Brandywine Global noted, "The market is acting like the risk has gone away, but I don’t think that’s how businesses and companies are going to view the situation."

Breakthrough in the war on fentanyl

A notable breakthrough came on fentanyl, a synthetic opioid responsible for tens of thousands of U.S. overdose deaths annually. China, a major source of precursor chemicals used in fentanyl production, agreed to curb exports in exchange for potential tariff relief. "They’ve agreed that they’re going to stop that," Trump said, suggesting Beijing could avoid "hundreds of billions of dollars in tariffs" by cooperating. The two nations also established a new economic dialogue framework, with future talks led by Bessent, Greer, and Chinese Vice Premier He Lifeng. The discussions will address non-tariff barriers, currency manipulation, and China’s subsidies for domestic industries, all longstanding U.S. grievances.

Political and economic stakes

For Trump, the deal offers a political win ahead of his Middle East trip, reinforcing his "America First" trade agenda. His aggressive tariffs had drawn criticism for fueling inflation, but supporters argue they forced China to the negotiating table. "The president is doing what he said he would," said Kelly Ann Shaw, a former Trump trade official. Yet challenges loom. The 90-day window is tight for resolving deep-seated disputes, and failure could reignite tensions. Meanwhile, European firms, already wary of U.S. trade volatility, may remain hesitant to re-engage with China.

A fragile détente

The tariff reduction signals a temporary thaw, but the U.S.-China trade war is far from over. While markets celebrate the reprieve, businesses and policymakers must prepare for either a lasting resolution or renewed conflict. Time will tell if this truce can evolve into a more stable economic relationship or if it’s merely a pause before the next escalation. Sources for this article include: ZeroHedge.com FoxNews.com Reuters.com