By Emma Farge, Olivia Le Poidevin and Andrea Shalal
GENEVA (Reuters) – The U.S. and China said on Monday they agreed to temporarily slash their steep tariffs on each other, sending global stocks and the U.S. dollar surging as the world’s top two economies tapped the brakes on a trade war that had fed fears of a global recession.
The U.S. will cut extra tariffs it imposed on Chinese imports last month from 145% to 30% for the next 90 days, the sides said, while Chinese duties on U.S. imports will fall to 10% from 125%.
Financial markets cheered the reprieve in a conflict that had brought nearly $600 billion in two-way trade to a standstill, disrupting supply chains and triggering layoffs. Investors had also worried about stagflation, a toxic combination of high inflation and weak economic growth.
Wall Street stocks jumped and the dollar rose, while safe-haven gold prices fell as the news eased investor concerns that Trump’s trade war could crater the global economy.
Seeking to reduce the U.S. trade deficit, Trump targeted countries worldwide with an array of tariffs, and levies on China were his most aggressive. Financial markets swooned, prompting him to pause most “reciprocal” tariffs on dozens of countries last month.
His erratic approach has rattled investors and weakened Trump’s approval ratings among U.S. voters worried tariffs will lift prices on everything from toys to cars.
The remaining U.S. tariffs on Chinese imports are still stacked atop prior U.S. duties. Even before Trump took office in January, China was saddled with 25% U.S. tariffs he had imposed on many Chinese industrial goods during his first term, with lower rates on some consumer goods.
Monday’s announcement leaves these duties unchanged, along with tariffs of 100% on electric vehicles and 50% on solar products imposed by former Democratic President Joe Biden.
The accord does not include the “de minimis” exemptions for low-value e-commerce shipments from China and Hong Kong, which the Trump administration terminated on May 2, according to a source familiar with the negotiations.
However, the deal went further than many analysts had expected following weeks of confrontational rhetoric on trade. Last week, Trump floated the possibility of dropping the tariff rate to a still sky-high 80%.
“This is better than I expected. I thought tariffs would be cut to somewhere around 50%,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management in Hong Kong.
Trump’s allies called Monday’s deal a political win for the president, who campaigned in 2024 on addressing unfair trade practices in hopes of resurrecting U.S. manufacturing capacity that had gone overseas. He won heavy support among blue collar workers in “Rust Belt” states like Michigan and Pennsylvania that have lost manufacturing jobs for decades.
“The president is doing what he said he would. This is absolutely about resolving disparities in the trading relationship,” said Kelly Ann Shaw, a senior U.S. official during Trump’s 2017-2021 term and now an attorney with Akin Gump Strauss Hauer & Feld.
But she cautioned that 90 days was not much time to address major U.S. concerns over non-tariff barriers such as subsidies for capital and labor.
“They’ve got their work cut out for them.”
‘THE EQUIVALENT OF AN EMBARGO’
“The consensus from both delegations this weekend is neither side wants a decoupling,” U.S. Treasury Secretary Scott Bessent said after talks with Chinese officials in Geneva. “And what had occurred with these very high tariffs … was the equivalent of an embargo, and neither side wants that.”
The meetings were the first face-to-face interactions between senior U.S. and Chinese economic officials since Trump returned to power.
China’s vice premier, He Lifeng, told reporters at China’s mission to the World Trade Organization on Sunday that the talks were “candid, in-depth and constructive.”
“The meeting achieved substantial progress and reached important consensus,” He said.
After Trump hiked tariffs on Chinese goods to 145%, China hit back by putting export curbs on some rare earth elements, vital for U.S. manufacturers of weapons and electronic consumer goods. Beijing raised tariffs on U.S. goods to 125%.
Andrew Gossage, CEO of Ultimate Products, which owns homeware and appliance brands that sell China-manufactured products mainly to the UK and Europe, said Chinese manufacturers will still prioritize European customers even if U.S. tariffs drop to pre-Trump levels.
“The U.S. has definitely gone into unreliable boyfriend territory when it comes to the attitude of the Chinese manufacturers to that market,” he said. “So they’re seeing European, UK markets as more rational, more reliable, less volatile.”
Shares in European firms hit by the trade war rallied after the deal. Shipping company Maersk was the biggest gainer in Europe, up more than 12%. It warned last week that container volumes between the U.S. and China had plunged due to the dispute.
“We hope it can lay the foundation for the parties to also reach a permanent deal that can create the long-term predictability our customers need,” Maersk said in a statement.
Shares in luxury firms rose, with LVMH up 7.4% and Gucci-owner Kering up 6.7%.
Bessent told U.S. media that much work remained to be done, and neither a place nor time for a next meeting had been set.
“Over the next 90 days, we have a mechanism to meet with the Chinese trade delegation,” he told MSNBC. “We will be discussing tariffs, non-tariff trade barriers, currencies and their subsidies of labor and capital, and how we can open up China to American businesses.”
He said Chinese officials had understood the importance of addressing the fentanyl crisis and for the first time appeared to be working to halt the flow of precursor drugs into the U.S.
Trump levied the tariffs in part after declaring a national emergency over fentanyl entering the U.S.
(Reporting by Emma Farge, Olivia Le Poidevin in Geneva, Andrea Shalal in Washington and David Lawder in Chicago; Additional reporting by Andrew Silver in Shanghai, Lisa Barrington in Seoul and Helen Reid in London; Writing by Dave Graham, Emelia Sithole-Matarise and Joseph Ax; Editing by Sharon Singleton and Ross Colvin)
