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The US and China reached a 90-day trade truce. Now begins the race to import stuff.

May 12, 2025
in News
The US and China reached a 90-day trade truce. Now begins the race to import stuff.
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US Secretary of the Treasury Bessent and US Trade Representative Greer attend a news conference in Geneva
The US and China came to a 90-day tariff truce after representatives of both countries met in Geneva for talks.

Olivia Le Poidevin/REUTERS

The US and China agreed to suspend most tariffs on each other’s goods for 90 days, following high-stakes negotiations in Geneva over the weekend.

As the tariff pause begins on Wednesday, experts expect a spike in trade between the countries, as companies race to front-load inventory while negotiators work on a deal.

“The negotiations suggest that both countries realize they need each other,” Andrew Collier, a senior fellow at the Mossavar-Rahmani Center for Business and Government of the Harvard Kennedy School, told Business Insider.

The temporary truce slashes China’s tariffs on the US from 125% to 10% and the US’s tariffs on China from 145% to 30%. The deal leaves President Donald Trump’s fentanyl-related 20% tariffs in place and does not restore the de minimis exemption, which applied to e-commerce from China and allowed Temu and Shein orders to remain duty-free.

Following the agreement, stocks rallied sharply on Monday, especially for tech. The Nasdaq Composite and the S&P 500 each surged around 3%, while the Dow Jones Industrial Average jumped more than 2.4% and gained over 1,000 points.

A spike in US-China trade

As businesses rush to get shipments across the Pacific while tariffs are lower, Scott Kennedy, senior advisor in Chinese business and economics at the Center for Strategic and International Studies, told Business Insider that he expects US-China trade to speed up during the 90-day negotiation.

“US-China trade should bounce back,” said Kennedy. “We may see a substantial jump in cargo for companies that are worried that we will be back at this intersection in a few months, and they need to take advantage of this respite to expand to accelerate trade.”

Chinese exports to the US spiked 15.6% in December 2024 compared to the same month in 2023 as businesses frontloaded inventory in anticipation of tariffs once President Donald Trump was inaugurated.

However, smaller businesses have previously told BI that they have cash flow constraints when ordering and storing a large volume of products. Increased demand for cargo shipping within a short time frame may also drive up shipping costs.

At the end of the 90 days, trade experts expect the outcome of negotiations to be broad and substantial, but believe there will be some thorny issues that can’t be resolved quickly.

Kennedy of CSIS is expecting the US to focus on China’s industrial policy, fentanyl, and intellectual property theft, while China would likely try to resolve US export controls, restrictions on investment, and the fees that are scheduled to be imposed on Chinese ships by October.

“With an extremely broad agenda, and the challenge will be narrowing that agenda toward something that looks like potential concessions by both sides,” said Kennedy.

Collier told BI that leaders of both countries are under different kinds of pressures to seal the deal.

“How the US will then try to tackle the knotty issue of state subsidies and China’s aggressive mercantilism will have to wait for another chapter,” he said.

Cautious optimism

While the stock market reacted to the US-China tariff pause with optimism, Federal Reserve Board Governor Adriana Kugler said that overall tariffs at their new level are still higher than they have been in recent decades. She said in a speech on Monday that this could still lead to a negative supply shock and a squeeze on real income.

“And the uncertainty associated with these tariffs has already generated effects on the economy through front-loading, sentiment, and expectations,” Kugler said.

Kugler expects economic growth to come short of last year’s 2.5% expansion, even though recession forecasts are sliding in betting markets as US-China tension cools. Progress made in combatting inflation has also slowed, she said, and inflation is still above the 2% goal.

“Trade policies are evolving and are likely to continue shifting,” she added. “Even as recently as this morning.”

The post The US and China reached a 90-day trade truce. Now begins the race to import stuff. appeared first on Business Insider.

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