US and China Agree to Slash Tariffs for 90 Days

Markets around the world reacted positively to the announcement, with the U.S. dollar strengthening and the yield on U.S. Treasurys rising.

U.S. Treasury Secretary Scott Bessent (R) and U.S. Trade Representative Jamieson Greer (L) hold a news conference in Geneva on May 12, 2025. Fabrice Coffrini/AFP via Getty Images

The United States and China said on May 12 that they have agreed to a deal to slash reciprocal tariffs for 90 days.

Speaking after talks with officials from the Chinese communist regime in Geneva, U.S. Treasury Secretary Scott Bessent told reporters that the two sides had agreed on a 90-day pause on measures and that they will lower their tariffs during that period.

Both economies have sought to end a trade war in which the United States slapped Beijing with a 145 percent tariff on Chinese goods, while the Chinese Communist Party hiked levies to 125 percent on U.S. imports in retaliation.

“Both countries represented their national interest very well,” Bessent said about the discussions.

“We both have an interest in balanced trade, the U.S. will continue moving towards that.”

Trade Representative Jamieson Greer said the U.S. reciprocal tariff rate will fall by 115 percentage points to 30 percent.

He added that China’s rate will also be cut by 115 percentage points, to 10 percent, and that Beijing will lift its countermeasures.

One reason President Donald Trump imposed tariffs on China (as well as on Mexico and Canada), he said, was that the Chinese regime has failed to take the necessary steps to curb the flow of the deadly drug fentanyl into the United States.

Trump also said the levies are a response to China’s “intellectual property theft, forced technology transfer, and other unreasonable behavior.”

Other measures that the United States put in place previously, including tariff measures from 2018 or tariffs imposed under other statutory authorities, remain unchanged for now, Greer said.

“The Chinese and the United States agreed to work constructively together on fentanyl,” he said.

The White House said that both countries have committed to taking action by May 14.

In a fact sheet published after the deal, the White House said that for “too long, unfair trade practices and America’s massive trade deficit with China have fueled the offshoring of American jobs and the decline of our manufacturing sector.”

According to the fact sheet, the U.S. goods trade deficit with China was $295.4 billion in 2024, “the largest with any trading partner.”

The White House said that the agreement works toward addressing “these imbalances.”

In a statement, China’s Ministry of Commerce said the high tariffs have “severely damaged normal bilateral trade and disrupted the international economic and trade order.”

Bessent said in a follow-up interview with CNBC’s Squawkbox: “We have a process now. We have a meeting mechanism. We loosely christened it the ‘Geneva Mechanism.’”

Bessent said he expects that in the next few weeks, representatives of the two countries will meet further to work on a more fulsome agreement.

“What we do want is a decoupling for strategic necessities, which we were unable to obtain during COVID,” Bessent said.

The United States will create and protect its steel industry, he said, adding that it will work on critical medicines and semiconductors.

Markets reacted positively to the deal.

Futures on the S&P 500 and Nasdaq jumped by 2.8 percent and by 3.5 percent, respectively, while in Europe, the STOXX 600 rose by 0.7 percent.

Hong Kong’s Hang Seng Index ended the day with a 3 percent gain.

The U.S. dollar strengthened by 1.6 percent following news that tariffs had been suspended, pushing its value higher against the pound, euro, and yen.

The yield on 10-year Treasurys rose to about 4.44 percent.

Meanwhile, oil prices surged, with both WTI and Brent crude seeing increases in reaction to the news of easing trade tensions.

Gold prices, previously helped by safe-haven demand, dropped by 3 percent.

“The de-escalation of tensions between China and the U.S., with tariffs being reduced for 90 days, is reducing the demand for safe haven assets like gold,” UBS analyst Giovanni Staunovo said.

“Near-term prices are likely to stay volatile. But higher tariffs are still weighing on economic growth and likely force central banks to cut further interest rates later this year. Also central banks might use this price setback to add exposure.”

When Trump first imposed his tariffs, European and Asian markets were rocked. For example, at the time, Hong Kong stocks fell dramatically, experiencing their biggest drop since 1997.

Speaking to reporters aboard Air Force One on April 6, in response to a question about the effect on the markets, Trump said: “I don’t want anything to go down. But sometimes you have to take medicine to fix something.”

Reuters contributed to this report.