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US and China reach agreement to reduce tariffs, marking a shift in trade relations and boosting market confidence
In a breakthrough development, the United States and China have agreed to temporarily roll back most tariffs on imports from one another, marking a drastic de-escalation of trade tensions between the world’s two most powerful economies.
The trade deal, which was announced on Monday, involves reducing tit-for-tat tariffs from 125 percent to 10 percent, although some tariffs will stay.
Details of the Agreement
The US has opted to continue imposing a 20 percent tariff on Chinese fentanyl-related imports, while the overall tariffs on China remain at 30 percent. The agreement, however, represents a turning point, with both nations agreeing to reduce tariffs by 115 percent within the next 90 days.
This tariff slowdown follows a series of high-level talks over the weekend in Lake Geneva, Switzerland, where US and Chinese trade officials were concentrating on ending long-standing economic grievances.
“We had extremely fruitful discussions, and the environment here in Lake Geneva gave a wonderful sense of equanimity to the process,” stated US Treasury Secretary Scott Bessent. “We have agreed to a 90-day pause, significantly lowering tariff levels. Both sides have committed to reducing tariffs by 115 percent.”
Impact on Financial Markets
Reports of the tariff halt created upbeat ripples in global financial markets. In the US, futures on Nasdaq jumped 3.6 percent, while the S&P 500 gained 2.8 percent and the Dow Jones gained close to 1,000 points. The ICE US Dollar Index, which measures the greenback versus a basket of world currencies, jumped 1.3 percent to 101.63.
Oil prices too experienced a rally, with Brent crude futures going up by 2.3 percent to trade at $65.38 a barrel. US West Texas Intermediate futures rose 2.4 percent to close at $62.49.
Experts Opine About the Deal
JP Morgan’s APAC chief market strategist, Tai Hui, said the tariff cut was bigger than expected, which was an indication that both countries are acknowledging the economic effect tariffs could be having on world growth.
Hui further added, “The 90-day timeline might not be sufficient for a thorough agreement, but it guarantees that the negotiations under pressure will be going forward.”
Investors are still eager to hear more information, specifically about China’s position on export restrictions for rare earth, which is still a source of uncertainty.
Looking Ahead: Ongoing Negotiations
Both parties stressed that both countries should create conditions to evolve a more sustainable economic relationship and that it should be further developed into a long-term spatial-economic relationship.
According to the joint statement, the two sides agreed to resume discussion on trade and economic issues as a future point of discussion, which would be initiated by US Treasury Secretary Scott Bessent, US Trade Representative Jamieson Greer, and Chinese Vice Premier He Lifeng. That future discussion point would alternate between being held in China, the US, or a third country.
This deal is a turning point in US-China trade relations, and it has the potential to influence global economic policy for decades to come.