New Agreement Promises Temporary Relief in US-China Trade Tensions

American and Chinese flags on a conference table.

The United States and China reach a 90-day agreement reducing tariffs from over 100% to just 10%, signaling the first major de-escalation in their ongoing trade war.

Quick Takes

The Trump administration brokered a trade agreement with China that slashes reciprocal tariffs by 115 percentage points, stabilizing at 10% for the next 90 days.
U.S. tariffs on Chinese goods drop from 145% to 30%, while Chinese tariffs on American products fall from 125% to 10%.
Global stock markets rallied on the news, with analysts describing it as a “dream scenario” and “huge win for the market.”
Both nations will establish ongoing discussions led by Chinese Vice Premier He Lifeng, U.S. Treasury Secretary Scott Bessent, and U.S. Trade Representative Jamieson Greer.
The effective U.S. tariff rate on Chinese imports is reduced from 108.8% to 27%, though 20% tariffs on fentanyl-related products remain in place.

Dramatic Tariff Reductions Exceed Market Expectations

The tariff reductions announced in Geneva far surpassed what financial analysts had predicted, triggering significant market responses worldwide. Under the agreement, U.S. tariffs on Chinese imports will drop from a prohibitive 145% to 30%, while China’s retaliatory tariffs on American goods will fall from 125% to just 10%. The arrangement provides immediate relief for businesses caught in the crossfire of escalating trade tensions and represents the first major breakthrough in U.S.-China economic relations in recent months. Both nations have committed to implementing these changes by Wednesday, setting the stage for a swift resumption of more normalized trade patterns.

Financial market reactions have been overwhelmingly positive, with European and Asian markets posting significant gains immediately following the announcement. U.S. stock futures indicated strong upward movement, and the U.S. dollar index rose by 1%. The yield on the benchmark 10-year Treasury note increased by 6 basis points, reflecting renewed economic optimism. While the 90-day timeframe is viewed as insufficient for crafting a comprehensive long-term agreement, it maintains pressure on both sides to continue productive negotiations while offering immediate economic benefits.

🚨 The US to cut tariffs on Chinese goods to 30% from 145% for 90 days.

Futures are up BIG pic.twitter.com/vWAt9CvVaL

— Crypto | Stocks | Freedom (@Wealthmanagerrr) May 12, 2025

Market Impact and Expert Analysis

Financial analysts have responded enthusiastically to the deal, with many viewing it as the beginning of a significant market rally. Wall Street strategists anticipate U.S. stocks will outperform European counterparts in the short term as American businesses with substantial Chinese exposure stand to benefit immediately. The effective U.S. tariff rate on Chinese imports will drop from 108.8% to 27%, though specific tariffs related to fentanyl will remain at 20%, reflecting ongoing concerns about illegal drug trafficking from China to the United States.

Global shipping and logistics sectors are expected to see immediate benefits as inventory increases and demand for container freight rebounds. Trade between the U.S. and China, which had been declining since April when the tariff war intensified, is projected to resume quickly. This economic reset addresses one of the most significant sources of market uncertainty in recent months, potentially clearing the way for continued market gains as businesses regain confidence in the stability of international trade rules.

Framework for Ongoing Discussions

The agreement establishes a structured mechanism for continuous dialogue on economic and trade relations during and beyond the 90-day period. Senior officials from both countries will lead these efforts, with Chinese Vice Premier He Lifeng working alongside U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer. The framework allows for meetings to take place alternately in China, the United States, or a third country, with additional working-level consultations scheduled as needed.

China has also agreed to suspend or remove non-tariff countermeasures against the United States taken since April 2, further easing trade tensions. The joint statement emphasized both nations’ commitment to developing a sustainable, long-term, and mutually beneficial economic relationship. While this temporary agreement doesn’t resolve all outstanding issues between the world’s two largest economies, it provides a foundation for addressing deeper structural concerns through continued dialogue and negotiation rather than through escalating tariff battles.