The United States and China have agreed to cut down on the punitive tariffs against each other.
The major deescalation of this trade war between Washington and Beijing has sent the stock markets sharply higher on Monday, May 12.
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The new tariff percentages
The US has agreed to cut tariffs on Chinese imports from a dramatic 145 percent to 30 percent, while China will cut tariffs on American imports from 125 percent to 10 percent.
It’s only temporary for now
But the suspension of the big numbers is only temporary for now, as the tariff truce was agreed to only last 90 days, with further negotiations between the countries being expected.
They spoke about it in Geneva
At a press conference in Geneva where US Treasury Secretary Scott Bessent led two days of talks over the weekend with Chinese Vice Premier He Lifeng, Bessent said, “Neither side was interested in a decoupling.”
Trump’s tariff war has been causing chaos
The major tariff war launched by US President Donald Trump in early April, on the day he called ‘Liberation Day’, has been causing nothing but economic chaos around the world.
The 145% tariff on Chinese goods launched by Trump threatened the biggest economic disruption since the Covid pandemic, as per The Guardian, Politico, and AlJazeera.
US stocks are rallying around the announcement
Since the US-China tariff pause announcement this morning on Monday, US stocks have rallied hard on the news.
The S&P 500 index, an index tracking the stock performance of the top 500 companies in the US, has gained 2.5% since the announcement, putting it higher than where it was after the ‘Liberation Day’ tariffs that caused it to drop more than 12%.
European stock markets have also risen
The news has also affected European stock markets, with the Euro Stoxx 600 index gaining 0.9% as investors seem to anticipate a positive effect on stock from the news of the tariff truce.
The move has been called a ‘massive deescalation’
The agreement between the US and China has been called a ‘massive deescalation’ by Claus Vistesen, chief eurozone economist for Pantheon Macroeconomics who also said that it seems “the trade war is over.”
Vistesen also argued that “the US started something and they couldn’t finish it.”
The pause lasts till August 10
As Trump maintains the global 10% baseline tariff and 25% sectoral tariffs on steel, aluminum, and cars, the US is also said to be investigating imports of commercial aircraft, jet engines and parts for added tariffs, as per Politico.
The US-China 90-day tariff pause lasts until August 10, which is about a month after the 90-day tariff pause between the US and the EU runs out.
