In a surprising and significant shift, the United States and China have agreed to a temporary suspension of most tariffs on each other’s goods, signaling a rare moment of cooperation between the world’s two largest economies.
The agreement, reached after high-level talks in Lake Geneva over the weekend, introduces a 90-day pause on the majority of reciprocal tariffs, with both countries slashing duties from a steep 125% to just 10%. However, the U.S. will maintain its 20% tariff on Chinese imports related to fentanyl, bringing the total average U.S. tariff on Chinese goods to 30%.
A Major De-escalation in Trade Tensions
The breakthrough comes at a critical time, following months of tit-for-tat tariff hikes that had rattled global markets and heightened fears of an economic downturn. Since returning to the White House in January, President Donald Trump has reimposed a series of aggressive trade measures designed to shrink the U.S. trade deficit—many of which targeted China.
China responded with harsh countermeasures, including tariffs and restrictions on rare earth elements, vital for various U.S. tech and defense applications. But this new agreement reflects a pivot toward diplomacy.
“We had very productive talks and I believe that the venue, here in Lake Geneva, added great equanimity to what was a very positive process,” said U.S. Treasury Secretary Scott Bessent during a news conference. “Both sides will move their reciprocal tariffs down 115%. It’s a substantial shift.”
Market Reaction: A Surge of Optimism
Financial markets surged on the news.
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The Dow Jones Industrial Average jumped more than 840 points, or 2%.
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S&P 500 futures rose 2.7%, while Nasdaq futures climbed 3.7%.
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The ICE U.S. Dollar Index gained 1.1%, reaching 101.46.
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International markets followed suit, with the pan-European Stoxx 600 up roughly 1%.
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Oil prices also rallied, with Brent crude futures rising 2.7% to $65.66 and WTI crude up 2.9% to $62.81 per barrel.
This rally reflects renewed investor confidence in the global economy, driven by hopes that the easing of trade tensions could translate to stronger growth.
Experts Weigh In: Progress With Caution
While the agreement is being praised as a “substantial de-escalation,” experts urge caution.
Mark Williams, Chief Asia Economist at Capital Economics, noted, “The U.S. still has much higher tariffs on China than on other countries and appears to be encouraging allies to follow suit. A 90-day truce doesn’t guarantee a long-term resolution.”
Tai Hui, Chief Market Strategist for Asia Pacific at J.P. Morgan Asset Management, emphasized the scale of the reduction. “This reflects both sides recognizing the economic reality that tariffs will hit global growth. Negotiation is a better option moving forward.”
However, Hui also stressed that the 90-day window may be too short to reach a comprehensive agreement. “It keeps the pressure on both sides to negotiate, but we’re still waiting for clarity on key trade issues, such as China’s restrictions on rare earth exports.”
What Comes Next?
The tariff pause officially begins Wednesday, giving negotiators a limited window to work toward a more permanent arrangement. Both countries have committed to continuing discussions on trade and economic policy, but the outcome remains uncertain.
As the clock ticks on this 90-day reprieve, the world will be watching closely. Will this ceasefire pave the way for lasting peace in the U.S.-China trade war? Or is it simply a temporary calm before another storm?
For now, markets—and businesses around the globe—are breathing a sigh of relief.
Stay tuned for updates as negotiations continue. For insights into how international trade policy shifts may affect your industry, subscribe to our newsletter or reach out directly.
