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The United States and China have agreed to a significant 90-day pause in their escalating trade war, marked by a substantial reduction in tariffs. This agreement, announced on May 12, 2025, follows high-level negotiations in Geneva and aims to provide a window for further discussions to resolve longstanding trade disputes.AP
Key Details of the Agreement
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Tariff Reductions: The U.S. will lower tariffs on Chinese goods from 145% to 30%, while China will reduce its tariffs on American imports from 125% to 10%. This mutual reduction amounts to a 115-percentage-point decrease on both sides.
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Duration: The tariff reductions are set for a 90-day period, during which both nations will engage in further negotiations to address deeper economic and trade issues.
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Exclusions: Notably, a 20% U.S. tariff on Chinese goods related to the fentanyl crisis will remain in place.
Economic Impact
The announcement has had an immediate positive effect on global financial markets. U.S. stock futures surged, with the S&P 500 and Nasdaq futures climbing up to 3.5%. The U.S. dollar strengthened, and oil prices rose, reflecting investor optimism about the easing of trade tensions.
In China, the yuan appreciated, and economic forecasts have been revised upward, indicating renewed confidence in future trade stability.
Statements from Officials
U.S. Treasury Secretary Scott Bessent emphasized that neither side seeks economic decoupling and highlighted the importance of balanced trade.
Chinese officials echoed this sentiment, expressing a desire to maintain open trade channels and avoid further escalation.
Future Outlook
While the 90-day truce provides temporary relief, experts caution that it does not resolve the underlying structural tensions between the two nations. Ongoing negotiations will be crucial in determining whether a long-term resolution can be achieved.
Both countries have agreed to establish a permanent dialogue mechanism to prevent future escalations, with high-level representatives designated to lead these discussions.
