The United States and China just made an amazing deal. This would involve a temporary suspension of most tariffs on each other’s goods, an important step to reduce trade frictions between these two economic juggernauts. THE SCENE On May 11, 2025, tense negotiations in Geneva announced the signing of this bilateral agreement. Senior trade negotiators from both countries took months of complex negotiations to arrive at this deal.
The deal allows Japan and the U.S. to suspend tariffs for up to 90 days. They’ll participate in intensive discussions on economic and trade policy more broadly. U.S. Treasury Secretary Scott Bessent emphasized the importance of the talks, stating, “We had very productive talks and I believe that the venue, here in Lake Geneva, added great equanimity to what was a very positive process.”
Under the new terms, reciprocal tariffs will be reduced significantly from 125% to a mere 10%. This significant drop is further evidence that the once-tense relationship between the U.S. and China is thawing. In recent years, this collegial relationship has turned into one of escalating tariffs and economic competition. Even with these favorable strides, U.S. intent to keep its current duties of 20% on imports from China related to fentanyl remains unchanged.
Notably, due to the agreement, total tariffs enforced on Chinese products will now be around 30%. This deal is the biggest change to trade by far. If both countries are serious and willing to meet each other halfway, a deal can benefit both nations. Bessent was most proud of the commitment shown from both sides. He proclaimed, “We have reached an agreement of a 90-day suspension and will heavily lower tariffs.” Both sides on the reciprocal tariffs will shift their tariffs down by 115%.
Reactions from the market to the announcement have been through-the-roof positive. The ICE U.S. Dollar Index blasted higher on the news by 1.3%, spiking to a high of 101.63 just after the news hit the tape. Futures for the S&P 500, Dow and Nasdaq composite all pointed to a sharply higher open. As of 6:38 a.m. ET, Nasdaq futures signaled a monster 3.6% gain, and S&P 500 futures jumped by 2.8%. Dow futures soared almost 1,000 points, or by 2.3%, as investors cheered the likelihood of lower trade barriers.
European markets were pleased too. The pan-European Stoxx 600 index, which includes makers like Volkswagen and Daimler, jumped by 0.7% during early morning trading. Together, these movements signal an increasing confidence in the market. This optimism is probably due to expectations of an easing of global trade tensions following the U.S.-China deal.
These continuous negotiations between the two countries further demonstrate their willingness to address decades-old trade matters. As you might imagine, both parties are doing everything possible to mend those fences. Analysts are hopeful that this unexpected agreement could lead to wider negotiations in the future. It can greatly enhance collaboration in a number of mutually beneficial economic sectors.
Leave a Reply