The United States (U.S.) and China have reached an agreement to temporarily reduce tariffs on each other’s goods, as the world’s two largest economies aim to resolve a damaging trade dispute. This dispute has raised concerns about a potential recession and has created uncertainty in financial markets.
Following discussions with Chinese representatives in Geneva, U.S. Treasury Secretary Scott Bessent announced that both nations have agreed to a 90-day suspension of further actions. He also stated that tariffs will be lowered by more than 100 percentage points, establishing a new baseline rate of 10 percent.
“Both countries represented their national interest very well,” Bessent said on Monday. “We both have an interest in balanced trade, the U.S. will continue moving towards that.”
“The U.S.-China step-down from the high tariffs for at least 90 days was the even-better-than -expected news that the market got on top of already positive expectations for this weekend’s trade talks in Switzerland. Specifically, the U.S. will step down to 30 percent and China to 10 percent from the former levels of up to 145 percent/125 percent. This saw another surge of USD strength that took out local resistance levels and stops. But I wonder if this move can hold much beyond today as we were already pricing for very good news and now the best possible news has now been crystallized – with long term uncertainty still very much in play. This could end up proving a sell-the-fact moment for the U.S. dollar in the big picture. Still, there is a risk to EURUSD to 1.1050 if 1.1200 can’t be regained very soon and USDJPY to 149+ if 146.00 or lower can’t be regained,” remarked Ole Hansen, head of Commodity Strategy, Saxo Bank to Economy Middle East.
Market reaction and economic impact
The dollar’s value increased against other major currencies, and markets experienced a boost following the announcement. This news helped to alleviate concerns about an economic downturn that was triggered last month by U.S. President Donald Trump’s increase in tariff measures, which were intended to reduce the U.S. trade deficit.
Bessent made these comments alongside U.S. Trade Representative Jamieson Greer after the weekend discussions in Switzerland, where both sides acknowledged progress in bridging their differences.
“The consensus from both delegations this weekend is neither side wants a decoupling,” Bessent said. “And what had occurred with these very high tariffs … was the equivalent of an embargo, and neither side wants that. We do want trade.”
First face-to-face meetings since Trump’s return
The Geneva meetings marked the first in-person discussions between high-ranking U.S. and Chinese economic officials since Trump’s return to office and his implementation of a global tariff strategy, with particularly significant duties imposed on China.
Since assuming office in January, Trump had increased the tariffs paid by U.S. importers for goods from China to 145 percent, in addition to the tariffs he had put in place on numerous Chinese goods during his initial term, as well as the duties imposed by the Biden administration.
China responded by implementing export restrictions on certain rare earth elements, which are crucial for U.S. manufacturers of both weapons and electronic consumer products. They also increased tariffs on U.S. goods to 125 percent.
On Sunday, the White House announced that the United States (U.S.) has reached a tentative trade agreement with China following two days of high-level negotiations in Geneva.
The announcement came after the U.S. Treasury Secretary, Scott Bessent, told reporters that there had been “substantial progress” in talks between his team and that of the Chinese Vice-Premier, He Lifeng, in Geneva on defusing the trade war between the world’s two largest economies.
Bessent, who led the talks alongside U.S. Trade Representative Jamieson Greer, described the meetings as “productive” and said a full briefing would take place later on Monday.
Read more: U.S. wants a fair trade deal with China, says Trump
At the press conference in Geneva, Greer said the speed of the agreement suggests the differences between the two nations may not have been as large as originally assumed.
“It’s important to understand how quickly we were able to come to agreement,” Greer said.
“Just remember why we’re here… the president declared a national emergency, and we’re confident that the deal we struck with our Chinese partners will help us work toward resolving that,” he added.
In a post on his Truth Social platform on Saturday, U.S. President Donald Trump said the talks had led to “a total reset… in a friendly, but constructive, manner.”
“Many things discussed, much agreed to,” Trump wrote.
The statement followed a month-long standoff between the world’s two largest economies after both countries imposed tariffs exceeding 100 percent on each other’s goods.