The United States and China said on Monday they reached a temporary agreement Reduce the tariffs that punish them for each other while they try to weaken the tariffs that threaten the world's two largest economies.
The countries said in a joint statement that they would suspend their respective tariffs for 90 days and continue to start negotiations this weekend. Under the agreement, the U.S. will reduce tariffs on Chinese imports from the current 145% to 30%, while China will reduce its import tariffs on U.S. goods from 125% to 10%.
“We came to the conclusion that we have a common interest,” Finance Minister Scott Bessent said at a press conference in Geneva. We met with Chinese officials on the weekend. “The consensus among both delegations is that both sides want to cancel the decoupling,” he said.
China said it would suspend or withdraw its retaliation against retaliation against escalating tariffs. In early April, the Chinese government ordered restrictions on the export of rare earth metals and magnets, a key component of the use of many industries, including automakers, aerospace manufacturers and semiconductor companies.
Mr. Bessent said the two countries could discuss the Chinese government's purchase of U.S. goods. Such deals could help narrow the U.S.-China trade deficit.
Currently, the agreement has broken a deadlock that has stagnated trade between China and the United States. Many U.S. businesses have suspended orders and hope that the two countries can reach an agreement to lower tariff rates. Economists warn that trade disputes will slow global growth, fuel inflation and create product shortages and could put the United States in recession.
“We're trying to identify a common interest,” Mr. Bessent said on CNBC on Monday. “We're listing the issues we're trying to solve, and I think we're doing a great job in that.”
The Treasury Secretary blamed the Biden administration for failing to meet its commitment to the trade deal Trump reached with China during his first term. He said the agreement will be the starting point for the current round of talks and is expected to continue the “richer agreement” in the coming weeks.
Chinese factories also saw a sharp drop in export orders to the United States, putting additional pressure on the slow economy. Chinese producers want to expand trade to Southeast Asia and elsewhere to circumvent U.S. tariffs.
Mr Bessent said the tariffs effectively created an embargo, neither of which wanted. The two countries said the ongoing negotiations would involve Mr. Bessent, Greer, who is the vice-president of China's economic policy, who led the Chinese talks over the weekend.
Mark Williams, chief economist at Asian capital economics, said in a research note that the deal is “another major retreat from the Trump administration's aggressive stance” because it does not include any Chinese commitment to currency or trade imbalances. He also pointed out that there is no guarantee that a 90-day truce will give way to a lasting deal, especially if the United States continues to try to gather other countries to limit trade with China.
Although temporarily under shockingly high tariffs, which is why companies from both countries celebrate, the impact will continue. As companies arrange goods in a 90-day negotiation window to take advantage of lower tariff rates, businesses may experience a lot of suppressed demand, causing shipping prices to soar.
The global market has announced the news. Hong Kong's benchmark index soared 3%, about the same as the S&P 500 stock futures.
Zhang, president and chief economist at Hong Kong investment firm Pinpoint Asset Management, said the agreement was a “good starting point” for both countries.
“From China's perspective, the results of this meeting were successful, as China took a difficult position on the U.S. threat of high tariffs and ultimately managed to significantly reduce the tariffs without making concessions,” he said.
U.S. Trade Representative Bessent and Jamieson Greer said the two countries had a substantial discussion of the U.S. demand, namely Beijing's trafficking of chemical ingredients used to make fentanyl. Mr. Bessent said the Chinese “understand the scale of the fentanyl crisis in the United States” and had a “positive path forward.”
Mr. Trump initially added 20% tariffs to China, accusing the country of not doing enough to prevent fentanyl from flowing to the United States. The punitive tariff remains. The “basic line” tariffs for almost every U.S. trading partner, including China, still exist.
Mr Greer said the negotiations were emphasized by “mutual understanding and mutual respect”.
Last month, the Trump administration announced a 90-day pause on reciprocity tariffs imposed on most trading partners, except for China. The White House has been on strike at the trade deal until the deadline expires in early July.
The Trump administration accuses China of unfairly subsidizing key sectors of its economy and flooding the world with cheap goods. Mr. Trump said China has “deprived” the U.S. manufacturing sector and lost the country's work through unfair trade practices.
Wang Wen, dean of the Institute of Finance at Renmin University of Beijing, said the agreement shows that both countries want to avoid “worst cases.” He said China is “better” in handling the pace and style of the second President than the way it was handled in the first Trump term.
When reaching the agreement, Mr. Bessent and Mr. Greer were careful not to confront China. Instead, they blamed the Biden administration for the trade war, accusing it of neglecting trade imbalances.
Mr. Bessent suggested that the two countries could help each other by balancing their economies, saying the United States could resume manufacturing and China could reduce overproduction of manufacturing.
In recent weeks, both parties have committed frauds in public. The White House repeatedly said it was talking to Chinese officials and Beijing denied that such negotiations were underway.
Beijing initially took a tough approach to Mr. Trump's punitive tariffs. Last month, Chinese Foreign Ministry spokesman Mao Ning released a video of Mao Zedong's speech during the Korean War (called in China the war to resist American aggression and aid South Korea), announcing, “No matter how long this war will last, we will never surrender.”
China has carefully participated in the Geneva negotiations, which is not a concession to Mr. Trump’s tariffs, but a necessary step to avoid further escalation. China's Ministry of Commerce said the agreement “is in line with the common interests of the two countries and the world” and hopes that the United States “continue to cooperate with China and meet each other.”
Since the tariffs were announced, China has taken many punitive measures against the United States. It suspended imports of sorghum, poultry and Bonemeal from U.S. companies and added 27 companies to the list of companies facing trade restrictions.
On Monday, even as China agreed to revoke the punitive measures taken in the past month, multiple Chinese agencies, including the Ministry of Commerce and the Ministry of National Security, met to discuss how to strengthen export controls for strategic minerals.
In a statement, the European Chamber of Commerce said in China that the announcement “encourages” but “uncertainty remains” as tariffs are only temporarily suspended.
President Jens Eskelund, President of the European Conference Hall, said: “I hope that the two sides will continue to have dialogue to resolve the differences and avoid measures to undermine global trade and cause collateral damage to those captured in the firefight.”
Before the weekend's trade discussion, Mr. Trump appeared to have expanded an olive branch by suggesting that tariffs be reduced to 80%. He wrote on “Social Truth” on Saturday that the negotiations were a breakthrough: “The overall reset was made in a friendly but constructive way.”
Nick Cumming-Bruce Reports from Geneva Christopher Buckley From Taipei, then Alan Rappeport and Anna Swanson From Washington.
