In a significant turn of events for U.S.-China trade relations, President Donald Trump declared a truce. This agreement will help both countries lock in mutually beneficial commitments to lower or eliminate tariffs on each other’s goods. The agreement will become effective Wednesday. To promote calming of tensions and set conditions for successful future negotiations. Under this deal, the U.S. will cut its tariffs on Chinese goods from 145% to 30%. In reciprocation on China’s part, it will be lifting or suspending its own non-tariff countermeasures, which had been implemented since April 2.
High-level negotiations in Geneva, Switzerland, facilitated by the United Nations, resulted in a six-month agreement. Though modest, this deal would see Trump’s “reciprocal” tariffs on China reduced to 10%. In return the U.S. agreed to remove a 20% tariff on certain products. Rather, it reflects the long-standing frustration over China’s purported role in trafficking fentanyl into America. In addition, China has agreed to reduce all its tariffs on U.S. goods from an average 125% to 10%.
President Trump has repeatedly underscored just how critical this agreement is. Implicit promise that tariffs would not lead to a return to the previous rate of 145%, even if we do not arrive at a long-term agreement after the initial 90-day truce expires. He added that the promises that China made on currency issues are a significant change in their trade policy.
“But they’ve agreed to open up China,” – President Donald Trump
Trump understated that many details of the pact remain to be worked out. As he put it to us, “We have to get it papered,” meaning there needs to be formal documentation of the terms before moving forward.
The U.S. administration previously imposed heavy tariffs on Chinese goods, creating what many viewed as a trade embargo with one of America’s largest suppliers. The recent negotiations mark a pivotal moment in efforts to address the longstanding trade imbalances and disputes between the two countries.
Both countries will stop most tariffs and trade obstructions. This settlement is for 90 days. This pause is considered the first step, but a very important one toward realizing a more stable and better trading relationship. During this period, the U.S. and Japan will continue to talk with the goal of settling existing trade problems.
“But they would go up substantially,” – President Donald Trump
The announcement of this agreement comes amidst heightened scrutiny over China’s trade practices and their impact on the U.S. economy. Market analysts view the temporary rollback in tariffs as a step toward a broader, long-term resolution. They are very concerned about the precedent that this creates in the long run.
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