[WORLD] The United States and China have agreed to slash steep tariffs on each other's goods for at least 90 days, offering a much-needed pause in the long-running trade war that has rattled markets and threatened global economic growth. The announcement, made Monday, sent stock markets soaring worldwide as investors welcomed the de-escalation between the world’s two largest economies.
Under the terms of the deal, the U.S. will reduce its tariffs on Chinese imports from 145% to 30% for the next three months. In return, China will lower its retaliatory tariffs on American goods from 125% to 10% for the same period. The agreement follows intensive negotiations over the weekend in Switzerland and marks the first substantial dialogue since the U.S. imposed the most recent round of tariffs in April.
Officials involved in the Geneva negotiations described the talks as “tense but constructive,” with both sides making concessions behind closed doors to secure a breakthrough. The U.S. reportedly agreed to ease restrictions on certain high-tech exports to China, while Beijing pledged to streamline regulatory approvals for American companies operating in the mainland. These side agreements were not included in the public announcement but are viewed by analysts as key confidence-building measures.
While the reductions are temporary, both sides have committed to ongoing discussions aimed at resolving deeper issues, including the U.S. trade deficit and concerns over the illicit fentanyl trade.
Market Reaction: Stocks Surge Globally
The news sparked an immediate and robust response in financial markets:
- The Dow Jones Industrial Average jumped by over 1,100 points, a rise of nearly 2.8%.
- The S&P 500 climbed 3.3%, reaching its highest level since early March.
- The tech-heavy Nasdaq Composite surged by 4.3%, with major technology firms like Nvidia, Apple, and Tesla posting notable gains.
- Stock markets in Europe and Asia also rallied, with Hong Kong’s Hang Seng Index up 3% and Frankfurt’s DAX index posting strong gains.
- The dollar strengthened against major currencies, while gold prices—a traditional safe haven—fell as investor anxiety eased.
The agreement also triggered a rebound in commodity markets. Copper futures, often seen as a bellwether for global economic health, rose 2.1%, reflecting improved sentiment around manufacturing demand. Crude oil prices climbed 1.8% on expectations of higher industrial activity, while shipping and logistics firms also saw notable share price increases across major exchanges.
Background: Tariff Escalation and Economic Impact
The trade war began in earnest after President Trump reimposed and escalated tariffs on Chinese goods earlier this year, peaking at 145%. China responded with its own steep duties, reaching 125% on select U.S. products. The tit-for-tat measures disrupted nearly $600 billion in bilateral trade, strained global supply chains, and contributed to job losses and inflationary pressures in both countries.
U.S. Treasury Secretary Scott Bessent described the deal as a step toward a more "strategic decoupling" from China, emphasizing that while a complete separation is not the goal, the U.S. seeks to reduce dependence on critical Chinese imports. The pandemic underscored vulnerabilities in supply chains, particularly for semiconductors and other essential goods, prompting calls for greater resilience.
China, meanwhile, has faced mounting pressure to stabilize its export sector, which has experienced contractions for three consecutive quarters. Beijing recently unveiled a suite of stimulus measures aimed at reviving industrial production and attracting foreign investment. Economists believe the tariff cuts could provide a timely boost to Chinese exporters and help stabilize regional supply networks that depend heavily on China’s manufacturing output.
Expert and Official Reactions
Analysts and officials broadly welcomed the agreement, though many cautioned that underlying tensions remain unresolved:
"This outcome surpasses my expectations. I anticipated tariffs would be reduced to around 50%, so this lower figure is encouraging. This is undoubtedly positive news for both nations' economies and the global economy, alleviating concerns about short-term disruptions to global supply chains," said Hiwe Zh, chief economist at Point Asia Management in Hong Kong.
President Trump, speaking at the White House, acknowledged that many tariffs would remain in place while negotiations continue, but stressed that the U.S. is "not looking to hurt China" and is seeking to open Chinese markets to American businesses.
In China, the state-run Xinhua News Agency called the agreement “a rational and necessary step” toward economic stability, though editorials in party-affiliated outlets emphasized the need for “technological self-reliance” and cautioned against overdependence on the U.S. market. These mixed messages reflect an ongoing internal debate within Beijing’s leadership about how to balance engagement with national security and industrial policy goals.
What’s Next? Uncertainty and Ongoing Talks
Despite the market euphoria, the agreement is a temporary truce rather than a comprehensive resolution. The 90-day window is intended to facilitate further negotiations on persistent issues such as intellectual property, market access, and the U.S. trade deficit.
Some tariffs—such as the U.S. 20% levy on Chinese goods linked to fentanyl—will remain, reflecting continuing pressure on Beijing to address the opioid crisis. Both sides have signaled willingness to maintain dialogue, but officials and market participants remain cautious about the prospects for a lasting settlement.
Implications for Businesses and Consumers
For U.S. businesses, especially those reliant on Chinese imports, the tariff rollback offers temporary relief from higher costs and supply chain disruptions. Retailers and manufacturers had warned that sustained high tariffs could lead to price increases for consumers and potential layoffs.
Tech companies, in particular, benefited from the news, with shares of Nvidia, Apple, and Tesla all rising sharply as trade-related anxieties eased. Retailers like Best Buy, which had previously cautioned about tariff-driven price hikes, also saw their stocks jump.
The U.S.-China tariff cut agreement represents a meaningful, if temporary, step back from the brink of a full-scale trade war. While markets have responded with optimism, the path to a comprehensive and lasting trade peace remains uncertain. Both governments face pressure to deliver concrete progress in the coming months, as the 90-day window ticks down and the world watches for signs of a more permanent détente.
WhatsApp
Instagram
Threads
