Constructive U.S.-China talks in Geneva have led to a decision that the U.S. will reduce tariffs on Chinese imports, which were imposed from January 2025 on both sides, from 145% to 30%, and China’s retaliatory tariffs on U.S. goods will be reduced from 125% to 10%. Thus, the agreement reached to reduce tariffs by 115% of each side within the next 90 days – to some extent calmed the international economic community.
Against this backdrop, CNN experts note that “global investors are welcoming a thaw in a trade war that has rattled financial markets, disrupted supply chains and heightened fears of recession”. At a news conference in Geneva, US Treasury Secretary Scott Bessent said: “Both delegations agreed that neither side wants a breakdown in relations. We do want trade. We want to achieve a greater balance in trade”. A spokesperson for China’s Ministry of Commerce called the joint statement “an important step by both sides to resolve differences through equitable dialog and consultation, laying the groundwork and creating conditions for further closing gaps and deepening cooperation”.
Following President Trump’s statement to reporters that “the weekend's talks have led to a ”complete reset of the terms of trade between the U.S. and China”, stock markets jumped, according to BBC News reporters, with investors cheering the de-escalation, with the S&P 500 Index jumping more than 3.2%, the Dow Jones Index rising 2.8%, and the Nasdaq up 4.3%. On Wall Street, shares of Target, Home Depot and Nike rose sharply in value, while technology stocks including Nvidia, Amazon, Apple and Facebook Meta also rose sharply. European stock indexes rose, with Hong Kong’s Hang Seng Index ending the day up 3%. The deal sent shares of shipping companies soaring, with Denmark’s Maersk up more than 12% and Germany’s Hapag-Lloyd up 14%. Maersk said the US-China agreement was “a step in the right direction” and that they now hope for a “permanent deal that can provide long-term predictability”. The International Chamber of Commerce said the deal sent a clear signal that the U.S. and China both want to avoid a “hard breakdown in relations”.
J.P.Morgan Research estimates such tariff cuts will continue through the end of 2025 and will have a significant impact on economic growth forecasts, including China’s annual growth forecast to 4.8 percent from a low of 4.1 percent. According to Haibin Zhu, head of research at J.P.Morgan Research, “the magnitude of the temporary tariff cuts is larger than expected and is a surprisingly positive development”. They also predicted that the US Federal Reserve will keep interest rates unchanged in the medium term until December 2025, the probability of recession in the US and globally has also dropped to below 50%.
To summarize, it should be emphasized that the agreement on trade tariffs has helped to ease the confrontation between the two countries and laid the foundation for overcoming uncertainty in trade policy.
* The Institute for Advanced International Studies (IAIS) does not take institutional positions on any issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of the IAIS.
