A surprise trade truce between the United States and China has brought a dramatic pause to months of escalating economic tensions, as both sides agreed to slash punitive tariffs by 115% for a 90-day period. The breakthrough, announced following high-level negotiations in Geneva, marks the first significant de-escalation since US President Donald Trump launched a tariff blitz that threatened to tip the global economy into recession. Markets around the world rallied in response, while officials on both sides praised the agreement as a step toward restoring stability in global trade.
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US Treasury Secretary Scott Bessent hailed the talks as “productive” and said both delegations displayed “great respect.” The weekend discussions were held between Bessent and Chinese Vice Premier He Lifeng, along with international trade representative Li Chenggang, in what Bessent described as a “robust” dialogue. “This is not a decoupling,” Bessent emphasized, signaling that both countries remain committed to maintaining economic ties despite months of tension.
From Triple-Digit Tariffs to Double-Digit Relief
Previously, US President Donald Trump had imposed tariffs as high as 145% on Chinese imports as part of a broader global tariff campaign. China responded with retaliatory duties of up to 125%, alongside non-tariff measures such as export restrictions on rare earth elements vital for US tech manufacturing.
Under the new agreement, both sides will reduce reciprocal tariffs by 115%. This brings China’s tariffs on US goods down to 10%, while US duties on Chinese imports will be cut to 30%. The discrepancy accounts for a pre-existing 20% fentanyl-related tariff imposed by the US, which remains in place.
Chinese officials called the move a “substantial achievement” and a step toward correcting what they described as the US’s “erroneous practice of unilateral tariff hikes.” A spokesperson from China’s commerce ministry said the agreement serves the interests of producers and consumers in both nations, as well as global economic health.
Market Rebound
Global markets responded positively to the news. The yuan soared to a six-month high, signaling investor optimism. European stock markets rallied sharply, with Germany’s DAX rising by 1.5% and France’s CAC index up 1.2%. In the US, Nasdaq futures jumped 3.7%, the S&P 500 rose 2.7%, and the Dow surged by over 840 points. The ICE U.S. Dollar Index also saw a 1.1% increase. Oil prices followed suit, with Brent crude rising over 2.7% and West Texas Intermediate up 2.9%.
Analysts say the agreement could prevent further economic damage. In China, up to 16 million jobs were reportedly at risk due to the trade war. In the US, the tariffs contributed to surging inflation and product shortages.
“This result far exceeds market expectations,” said William Xin, chair of Spring Mountain Pu Jiang Investment Management. “Previously, the hope was just that the two sides could sit down. Now, there’s more certainty.”
Lingering Issues and Global Reactions
Despite the truce, underlying tensions remain. Wang Wen of the Chongyang Institute for Financial Studies cautioned that the deal does not resolve deeper structural issues between the two powers. “This does not mean there will be no friction going forward,” he said.
US officials also made clear that concessions from China were critical. White House Press Secretary Karoline Leavitt said tariff relief would not be unilateral, insisting China must continue to meet American demands. Trump had hinted on social media that an “80% tariff on China seems right,” suggesting hardline views still persist within the administration.
One key development from the Geneva talks was China’s increased willingness to engage on the issue of fentanyl. Bessent noted that Chinese delegates showed new understanding of the scale of America’s opioid crisis—a topic tied to the US’s remaining 20% fentanyl tariff.
The World Trade Organization welcomed the progress. Director-General Ngozi Okonjo-Iweala said the development “bodes well for the future,” emphasizing its importance not only for the two countries but also for vulnerable economies worldwide.
Pressure on Future Negotiations
While the deal marks a major step back from the brink, experts warn the 90-day window leaves little time for a comprehensive settlement. Tai Hui of J.P. Morgan Asset Management said the scale of the tariff cuts was larger than anticipated, but warned the pressure remains high for a longer-term resolution.
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“There is no guarantee this truce leads to a lasting ceasefire,” added Mark Williams of Capital Economics. “But it’s a substantial de-escalation, and the global economy needed that.” For now, the world watches as the US and China resume discussions, hoping this pause leads to durable peace in the global trade arena.