The U.S. and China agreed on Monday to significantly reduce tariffs on each other for an initial 90-day period in a major breakthrough in the trade war between the world’s two largest economies.
Coming into effect on Wednesday, May 14, both countries will reduce tariffs on the other by 115% for that initial period, according to U.S. Treasury Secretary Scott Bessent. That effectively means that U.S. tariffs on Chinese exports will come down to 30%, while Chinese tariffs on American goods will climb down to 10%.
The higher U.S. rate is because 20% tariffs applied in February and March, which President Donald Trump said was in response to the flow of fentanyl, will remain in effect.
Bessent said both sides showed “great respect” in marathon trade negotiations in Geneva over the weekend that resulted in the breakthrough, and that “neither side wants a decoupling.”
A spokesperson for China’s Ministry of Commerce said that Beijing hopes the U.S. will “continue to move forward in the same direction with China, completely correct the erroneous practice of unilateral tariff hikes, and continually strengthen mutually beneficial cooperation.”
The trade war has caused Chinese exports to plunge and the U.S. has seen its first quarterly GDP contraction since 2022.
Markets surged on Monday in the wake of the tariff pause news. Hong Kong’s Hang Seng index was up by almost 3% during Asian afternoon trading, while U.S. stock futures climbed sharply.
In a joint statement issued by the White House, both the U.S. and China said they have agreed to continue discussions over the coming days. “The two sides may conduct working-level consultations on relevant economic and trade issues,” the statement said.
Bessent will be representing the U.S. with He Lifeng, Vice Premier of the State Council, set to represent China in these future meetings.
The 90-day pause is the most significant reduction yet in the ongoing trade war between the U.S. and other nations.
Charlier Cornes, a senior economist at the Center for Economics and Business Research, told TIME that Monday’s pause “reinforces the view that the U.S. remains open to negotiating tariff arrangements” but cautioned that rates are still higher than before “Liberation Day” on Apr. 2.
One week later, on Apr. 9, Trump announced a 90-day tariff pause for most countries except China. The two countries subsequently launched tit-for-tat levies that led to unprecedented U.S. tariffs on Chinese goods of 145% and a reciprocal rate of 125% from China.
The post U.S. and China Agree on Tariff Pause in Major Trade War Rollback appeared first on TIME.
