On May 12, U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer announced that the United States and China had reached an agreement to temporarily reduce reciprocal tariffs, aiming to alleviate the trade tensions that have unsettled global markets. Following meetings in Geneva—the first in-person discussions between U.S. and Chinese economic officials since President Donald Trump reinstated tariffs—Bessent confirmed a 90-day pause on tariff increases, reducing certain tariffs by over 100 percentage points to 10%. He emphasized that both nations successfully represented their interests and expressed a mutual goal for balanced trade.
Since taking office in January, Trump significantly raised tariffs on Chinese imports to 145%, impacting nearly $600 billion in trade and exacerbating supply chain disruptions, inflation concerns, and job losses. In retaliation, China imposed export restrictions on key rare earth elements crucial for U.S. manufacturing and increased tariffs on American goods to 125%.
Although details of the agreement remain vague, these discussions generated optimism in financial markets, with Wall Street stock futures rising, and the dollar strengthening against safe haven currencies. The tentative thawing of relations suggests a potential mitigation of fears regarding a global recession, as both superpowers work toward resolving longstanding trade conflicts. The implications of this agreement may help stabilize supply chains and restore investor confidence in the wake of heightened tariffs and economic uncertainty.
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