The United States and China have agreed a deal to temporarily slash reciprocal tariffs as the world’s two biggest economies seek to end a damaging trade war that has stoked fears of recession and set financial markets on edge.
Speaking after talks with Chinese officials in Geneva, U.S. Treasury Secretary Scott Bessent said the two sides had agreed on a 90-day pause on measures and that tariffs would come down by over 100 percentage points to a 10% baseline rate.
“Both countries represented their national interest very well,” Bessent said on Monday. “We both have an interest in balanced trade, the U.S. will continue moving towards that.”
The dollar rose against major currencies and markets lifted following the news, which helped allay concerns about a downturn triggered last month by U.S. President Donald Trump’s escalation of tariff measures aimed at narrowing the U.S. trade deficit.
While giving no details, U.S. negotiators say two days of intense trade talks with China have yielded ‘substantial progress’ and claim a deal is near. Beijing struck a more reserved tone, but did call the talks ‘substantive.’
Bessent was speaking alongside U.S. Trade Representative Jamieson Greer after the weekend talks in Switzerland in which both sides had hailed progress on narrowing differences.
“The consensus from both delegations this weekend is neither side wants a decoupling,” Bessent said. “And what had occurred with these very high tariffs … was the equivalent of an embargo, and neither side wants that. We do want trade.”
The Geneva meetings were the first face-to-face interactions between senior U.S. and Chinese economic officials since U.S. President Donald Trump returned to power and launched a global tariff blitz, imposing particularly hefty duties on China.
Since taking office in January, Trump has hiked the tariffs paid by U.S. importers for goods from China to 145 per cent, in addition to those he imposed on many Chinese goods during his first term and the duties levied by the Biden administration.
China hit back by putting export curbs on some rare earth elements, vital for U.S. manufacturers of weapons and electronic consumer goods, and raising tariffs on U.S. goods to 125 per cent.
The tariff dispute brought nearly $600 billion in two-way trade to a standstill, disrupting supply chains, sparking fears of stagflation and triggering some layoffs.
Financial markets were buoyed by the latest thaw in the trade war and Wall Street stock futures climbed as the talks boosted hopes a global recession might be avoided.
“This is better than I expected. I thought tariffs would be cut to somewhere around 50 per cent,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management in Hong Kong.
“Obviously, this is very positive news for economies in both countries and for the global economy, and makes investors much less concerned about the damage to global supply chains in the short term,” Zhang added.
Following the talks on Sunday, U.S. officials touted a “deal” to reduce the U.S. trade deficit, while Chinese officials said the two had reached an “important consensus” and agreed to launch another new economic dialogue forum.
Trump gave a positive reading of the talks before they had concluded, saying that the two sides had negotiated “a total reset… in a friendly, but constructive, manner.”
The U.S. president levied the tariffs in part after declaring a national emergency over fentanyl entering the United States, and Greer said conversations over curbing the deadly opioid were “very constructive” though on a separate track.
Chinese Vice Premier He Lifeng was less categorical in his declarations but still hailed “substantial progress” following the talks that were held at the gated, private villa of the Swiss ambassador to the United Nations overlooking Lake Geneva.
