U.S. and China Reach Tariff Truce, Easing Trade Tensions with 90-Day Suspension Deal

12 May 2025

Donald Trump and Xi Jinping / Reuters/ Lamarque

The recent agreement between the United States and China to reduce tariffs marks a significant de-escalation in their ongoing trade tensions. This truce, announced after talks in Switzerland, involves both countries lowering import taxes on each other's goods, with some tariffs being canceled and others suspended for 90 days.

Tariff Reductions: The U.S. has agreed to reduce additional tariffs on Chinese imports from 145% to 30%. Conversely, China will lower its recently increased tariffs on certain U.S. goods from 125% to 10%.

Suspension Period: Both nations have suspended specific tariffs for a 90-day period, effective by May 14, 2025.

Non-Tariff Measures: China has halted and scrapped other countermeasures, such as restrictions on the export of critical minerals to the U.S.

Fentanyl Trade: The U.S. maintains an additional 20% tariff component aimed at pressuring China to curb the illegal trade of fentanyl, a potent opioid.

This agreement is seen as a positive step towards stabilizing economic relations between the two largest global economies. U.S. Treasury Secretary Scott Bessent emphasized that "neither side wants a decoupling," indicating a mutual interest in continued cooperation. China's commerce ministry echoed this sentiment, viewing the deal as a foundation to bridge differences and deepen collaboration.

However, the future remains uncertain. If the suspended tariffs are reinstated after the 90-day period, U.S. tariffs on Chinese goods would rise to 54%, and Chinese tariffs on U.S. goods would increase to 34%. Ongoing negotiations will be crucial in determining whether a more permanent resolution can be achieved.

The trade relationship between the U.S. and China is extensive. In 2024, the U.S. exported significant quantities of soybeans, pharmaceuticals, and petroleum to China. Meanwhile, China exported large volumes of electronics, computers, and toys to the U.S., with smartphones many of which are Apple iPhones manufactured in China being a major import category.

The U.S. trade deficit with China has been a longstanding concern, with the U.S. importing approximately $440 billion worth of goods from China while exporting about $145 billion to China. President Trump's tariff strategy aimed to address this imbalance by encouraging domestic manufacturing and reducing reliance on Chinese imports.

The recent truce has been welcomed by markets, with investors anticipating a rebound in trade activities across the Pacific. However, experts caution that while this agreement is a step in the right direction, the underlying issues in U.S.-China trade relations will require sustained dialogue and negotiation to resolve fully.