US and China Pause Trade War
The trade conflict between the US and China sees a temporary halt, causing a ripple effect in global trade and supply chains. As a result, the Dow Jones Industrial Average and the S&P 500 both surged following this news.
President Donald Trump stated on Monday, during a press conference with reporters, “We achieved a complete reset with China yesterday after productive consultations in Geneva.”
“I think it’s great for China. I think it’s great for us,” he elaborated. “It’s perfect for unity and peace.”
A joint statement from both governments emphasized the significance of their economic relationship. It noted that over the next 90 days, both nations would roll back tariffs on each other’s goods by 115%.
The White House highlighted this trade agreement as a triumph for the US, demonstrating its capacity to secure favorable deals for American interests.
Trump asserted, “China will realize that the era of tearing apart the US and other nations is no longer viable.”
Earlier in April, Trump had imposed a 10% tariff on all imports entering the US and introduced “mutual” tariffs targeting countries with considerable trade barriers, particularly China, which had incurred a record $29.54 billion trade deficit with the US last year.
A few days later, Trump announced a 90-day suspension of these mutual tariffs, particularly for China, which had reacted by imposing tariffs on US goods.
“Due to China’s lack of respect for the global market, I’m raising the tariffs imposed on China to 125%, effective immediately,” Trump stated on April 9th.
Tariffs have significantly rattled global markets, applying intense pressure on China.
Treasury Secretary Scott Bescent proposed last month that high tariff rates between the two nations (145% against China and 125% against the US) were effectively hindering trade between these two major economies.
Bescent and US Trade Representative Jamieson Greer met with Chinese officials in Geneva to discuss the ongoing trade issues.
Trump shared on social media that discussions were progressing well, stating, “A lot of things were discussed and a lot of things agreed upon, leading to a total reset negotiated in a friendly and constructive way.”
China has agreed to halt its retaliatory tariffs on American products from April 4th, although it will keep a 10% tariff during the truce. The US will also pause tariffs imposed on China on April 8th and 9th but maintain a 10% tariff. The administration aims to create fair baselines that support domestic production and fortify supply chains to benefit American workers.
The pre-existing tariffs on China from before April 2nd, including those implemented due to a national emergency regarding fentanyl, will remain in effect.
During the Geneva announcements, Bescent remarked that both delegations sought to avoid decoupling economically. “What transpired with these elevated tariffs was akin to an embargo, which neither side desires,” he added. “We want trade and balance in our exchanges.”
Trump mentioned that the Chinese government agreed to fully open its market, although it would take time before these agreements are formalized.
The markets reacted positively to this news, with increasing inventories and declining safe-haven assets. Expectations for Federal Reserve cuts also diminished dramatically.
Kathleen Brooks, research director at Investment Group XTB, remarked, “This news is a significant driver of the suspension of tariffs between China and the US, with the US lowering its tariffs on Chinese products from 145% to 30%, while China has reduced its tariffs on US goods to 10%.”
Brooks added that while the Treasury Secretary indicated tariffs might not decrease further, the agreements made would end the trade embargo, marking a new chapter in relations between the two largest economies.
