The US and China have agreed to lower import taxes on goods traded between the two countries, marking a significant de-escalation of the trade war. Both nations will cancel some tariffs and suspend others for 90 days. US tariffs on Chinese imports will drop from 145% to 30%, while Chinese tariffs on some US imports will decrease from 125% to 10%. China will also scrap non-tariff countermeasures, such as exporting critical minerals to the US.
What’s Next?
After 90 days, the suspended tariffs may be reinstated, but talks between the governments will continue, potentially leading to a further deal. Even if tariffs are reinstated, US tariffs on China would rise to 54%, and Chinese tariffs on the US would increase to 34%. US Treasury Secretary Scott Bessent noted that “neither side wants a decoupling,” while China’s commerce ministry said the agreement is a step to “lay the foundation to bridge differences and deepen co-operation”.
Trade Between the US and China
The two countries traded heavily in 2024, with the US exporting soybeans, pharmaceuticals, and petroleum, while China exported electronics, computers, and toys. Smartphones, including Apple iPhones made in China, account for 9% of US imports from China. However, the US buys more from China ($440bn) than it sells ($145bn), a trade imbalance that has drawn criticism from President Trump.
Who Won?
Both sides claim victory, with the White House stating, “This trade deal is a win for the United States, demonstrating President Trump’s unparalleled expertise in securing deals that benefit the American people.” Janka Oertel, director of the Asia programme at the European Council on Foreign Relations, notes that China is in a “psychologically stronger position now than before”. Economists at Deutsche Bank suggest that the UK-US deal on tariffs and the US-China agreement set a “likely cap and floor” for Trump’s rates, with the UK’s 10% tariff rate and China’s 30% rate setting the bounds for US tariffs.
Market Impact
The truce is expected to lead to a rebound in goods shipped across the Pacific, with shares rising for major shipping firms. Investors are optimistic about the agreement, but the trade war is far from over. As Faisal Islam notes, “China has come to the table – but this fight is far from over”.