Tariff Truce: Inside the 90-Day U.S.–China Agreement That Shocked Global Markets

On May 12, 2025, the United States and China reached a significant agreement to reduce tariffs for a 90-day period, marking a notable de-escalation in their ongoing trade tensions. This temporary truce aims to foster further negotiations and stabilize global economic relations.

A Comprehensive Analysis

The recent agreement between the United States and China to relieve tariffs marks a significant shift in the economic relationship between the world's two largest economies. This development comes after years of trade tensions that have impacted global supply chains and economic growth.

This comprehensive blog post examines the background of the trade dispute, details of the new agreement, expected economic impacts, and perspectives from key stakeholders.

Background: Escalating Trade Tensions

Prior to this agreement, both nations had imposed escalating tariffs that strained global trade:

• U.S. Tariffs: Tariffs on Chinese goods had increased to 145%, affecting a wide range of products.

• Chinese Retaliation: China responded with tariffs reaching 125% on U.S. imports, including agricultural products and manufactured goods.

These measures had significant impacts on global markets, supply chains, and economic growth, prompting concerns among businesses and policymakers worldwide.

Historical Context of US-China Trade Tensions

The trade relationship between the United States and China has been characterized by periods of cooperation and conflict. The most recent period of heightened tensions began in 2018 with the implementation of tariffs on Chinese goods by the Trump administration, citing concerns about trade imbalances, intellectual property theft, and forced technology transfers. China responded with retaliatory tariffs, initiating what many economists termed a "trade war."

These tensions continued through multiple rounds of negotiations, partial agreements, and setbacks, creating a complex web of tariffs affecting hundreds of billions of dollars in bilateral trade.

Key Terms of the Agreement

• U.S. Tariff Reduction: The United States agreed to lower tariffs on Chinese imports from a peak of 145% to 30%.

• China's Tariff Reduction: China committed to reducing its tariffs on U.S. goods from 125% to 10%.

• Duration: Both countries have agreed to maintain these reduced tariffs for a 90-day period, during which further negotiations are expected to take place.

This agreement was reached during high-level talks in Geneva between U.S. Treasury Secretary Scott Bessent and Chinese Vice-Premier He Lifeng. The discussions were described as a significant first step toward resolving trade disputes and promoting global economic stability.

Major Elements of the New Tariff Relief Agreement

The newly announced agreement includes several significant provisions:

1. Phased Tariff Reductions: A graduated schedule for reducing tariffs on both sides, with specific timelines for different product categories.

2. Targeted Relief for Critical Industries: Priority relief for sectors deemed strategically important to both economies, including agricultural products, medical supplies, and clean energy components.

3. Enforcement Mechanisms: New frameworks for addressing compliance concerns, with specific metrics and verification procedures.

4. Market Access Commitments: China has agreed to expand access for U.S. companies in previously restricted sectors, particularly in services and digital commerce.

5. Intellectual Property Protections: Enhanced commitments regarding intellectual property rights, including more robust enforcement mechanisms and penalties for violations.

Economic Implications

The agreement is expected to have far-reaching economic effects:

• Reduced Consumer Costs: American consumers should see lower prices on Chinese imports, particularly in electronics, apparel, and household goods.

• Supply Chain Stabilization: Companies that had been forced to reconfigure supply chains can now potentially revert to more efficient arrangements.

• Agricultural Export Opportunities: U.S. farmers stand to benefit significantly as China has committed to substantial purchases of agricultural products.

• Market Confidence: Financial markets have responded positively to the announcement, with both U.S. and Chinese stock indices showing gains.

Industry-Specific Impacts

Different sectors will experience varying impacts from the tariff relief:

Manufacturing

The manufacturing sector, which has experienced significant disruption due to tariffs, can expect reduced input costs and potentially greater access to the Chinese market. However, companies that shifted production in response to tariffs face complex decisions about whether to reverse those investments.

Technology

Technology companies, particularly those with complex global supply chains, stand to benefit from reduced tariffs on components and finished goods. However, concerns about technology transfer and national security considerations remain significant factors in this sector.

Agriculture

U.S. agricultural producers, especially soybean, pork, and dairy farmers, anticipate expanded export opportunities as Chinese tariffs are reduced and purchasing commitments are implemented.

Perspectives from Key Stakeholders

Reactions to the agreement have been mixed:

Business associations have generally welcomed the tariff relief, citing reduced costs and greater certainty. The U.S. Chamber of Commerce called it "a positive step toward normalizing the essential economic relationship between the world's two largest economies."

Labor organizations have expressed concerns about the potential impact on American workers, particularly in manufacturing sectors that had been protected by tariffs.

Policy experts remain divided, with some praising the pragmatic approach to reducing economic tensions, while others argue that the agreement does not adequately address structural issues in the economic relationship.

Market Reactions

The announcement of the tariff reductions had immediate positive effects on global markets:

• Stock Markets: U.S. stock futures rose sharply, with significant gains in technology stocks such as Amazon, Apple, and Tesla.

• Currency and Commodities: The U.S. dollar strengthened, and commodity prices, including oil, saw increases, reflecting improved market sentiment.

Challenges and Uncertainties

Despite the positive developments, several challenges remain:

• Implementation Timeline: The phased approach means that full benefits will not be realized immediately, and there are concerns about potential delays or complications in implementation.

• Unresolved Issues: Several contentious issues remain unaddressed, including Chinese industrial subsidies and certain aspects of technology competition.

• Political Dynamics: The sustainability of the agreement depends on political support in both countries, which remains uncertain given domestic pressures.

Looking Forward

The tariff relief agreement represents a significant shift in U.S.-China economic relations, but it is just one element in a complex bilateral relationship. Ongoing dialogue, particularly on issues related to technology, investment, and strategic competition, will be crucial to maintaining momentum.

The agreement also occurs against the backdrop of broader global economic challenges, including inflation concerns, supply chain disruptions, and post-pandemic recovery efforts. How these factors interact with the tariff relief measures will significantly influence the ultimate impact of the agreement.

Conclusion

The U.S.-China agreement to relieve tariffs represents a pragmatic recognition by both sides of the economic costs of prolonged trade tensions. While it does not resolve all points of contention, it provides a foundation for potential further cooperation and economic benefits for both countries.

Businesses, policymakers, and consumers should monitor implementation closely and remain attentive to broader developments in this crucial bilateral relationship, which continues to shape the global economic landscape.