After talks last weekend, the US and China agreed to suspend some reciprocal tariffs for 90 days, while significantly reducing total import tariffs.
"We have reached an agreement to suspend tariffs for 90 days and significantly reduce import tariffs. Reciprocal tariffs on both sides will be reduced by an additional 115 percentage points," US Treasury Secretary Scott Bessent said at a press conference on May 12.
The meeting was also attended by US Trade Representative Jamieson Greer. In a joint statement released by the White House, the 24% import tariff on China in the reciprocal tariff order signed by Mr. Trump on April 2 will be postponed for 90 days.
The base tariff of 10% remains the same. The 20% tariff imposed on China related to fentanyl trafficking into the US, which was previously imposed, will also be retained.
As a result, total import tariffs on Chinese goods will be temporarily reduced from 145% to 30%. Meanwhile, China will also remove some retaliatory tariffs against US reciprocal tariffs. Therefore, tariffs on US goods will be temporarily reduced from 125% to 10%.
Following Bessent's announcement, US stock market futures jumped. S&P 500 futures rose 2.8%. Nasdaq 100 futures rose 3.6% and DJIA futures rose 2.3%.
Meanwhile, the world gold price has dropped by $100 per ounce, to $3,222.
Last weekend, US and Chinese officials met in Geneva (Switzerland) to discuss trade issues. After the meeting, the US side said it had reached an agreement to reduce the trade deficit with China. According to data from China Customs, last year, the US trade deficit with China reached 361 billion USD.
On Xinhua, Chinese Vice Premier He Lifeng assessed that the negotiations were in-depth, frank, and constructive. The senior Chinese official also confirmed that the two sides had reached a series of important consensuses, agreeing to establish an economic and trade consultation mechanism.
However, Tianchen Xu, senior economist at the EIU research firm, said that efforts to reach a comprehensive agreement "will take a lot of time and may not bring the desired results". The reason is that both sides have shown that they are not willing to make concessions on issues related to strategic priorities.
"We think it will be difficult for the US and China to reach something similar to the phase one trade deal during Trump's first term," Xu said.
China's Ministry of Commerce also said on May 12 that the two sides committed to taking action on the deal before May 14. Beijing will also take all necessary measures to postpone or remove non-tariff barriers imposed on the US since April 2.
The joint statement by the two countries, published by Xinhua, said that after taking the above actions, the two sides will establish a mechanism to continue discussions on economic and trade relations. These discussions can take place alternately in China and the US, or in a third country if both sides agree. When necessary, the two sides can conduct consultations on related economic and trade issues.
The two countries signed the deal in January 2020 after more than a year of intense negotiations. The details of the phase one trade deal between the two sides were announced by the White House, 86 pages long, including 8 chapters.
It includes provisions on intellectual property in China, a commitment for China to buy at least 200 billion USD of US goods and services in the next two years, as well as not to manipulate its currency. In return, the US reduced tariffs on some Chinese goods. However, Beijing later failed to achieve its purchasing goals due to the Covid-19 outbreak.
(according to Reuters)