U.S. Secretary of the Treasury Scott Bessent and U.S. Trade Representative Jamieson Greer attend a news conference after trade talks with China in Geneva, Switzerland, May 12, 2025. REUTERS/Olivia Le Poidevin
Key Provisions of the Agreement:
On May 12, 2025, the United States and China reached a significant agreement to temporarily reduce reciprocal tariffs, marking a notable de-escalation in their ongoing trade tensions. This 90-day accord, achieved during high-level negotiations in Geneva, aims to alleviate the economic strain caused by the protracted trade dispute between the world’s two largest economies.
- Tariff Reductions: The United States will lower its tariffs on Chinese imports from 145% to 30%, while China will reduce its tariffs on U.S. goods from 125% to 10%.
- Duration: These tariff reductions are set to remain in effect for 90 days, providing a window for further negotiations aimed at resolving deeper structural issues in the bilateral trade relationship.
Economic and Market Reactions:
The announcement of the tariff reductions had an immediate positive impact on global financial markets. In the United States, major stock indices experienced significant gains:
- S&P 500: Increased by 2.53%, reaching its highest level since early March.
- Dow Jones Industrial Average: Rose by 2.51%.
- Nasdaq Composite: Climbed by 3.34%.
Technology and consumer discretionary sectors led the rally, with notable performances from companies such as Apple Inc. and Nvidia Corporation. The positive market response reflects investor optimism that the tariff reductions may signal a thawing of U.S.-China trade relations.
Official Statements and Perspectives:
U.S. Treasury Secretary Scott Bessent, who played a pivotal role in the Geneva negotiations, emphasized that the agreement represents a mutual commitment to balanced trade and the avoidance of economic decoupling.
President Donald Trump characterized the outcome as a “total reset” of U.S.-China trade relations, asserting that his administration’s assertive trade policies have yielded tangible results.
In China, official media outlets welcomed the agreement, highlighting the constructive nature of the talks. However, public sentiment on Chinese social media platforms exhibited skepticism, with concerns about the durability of the agreement and the potential for future policy reversals by the U.S. administration.
Economic Forecasts:
In light of the agreement, JPMorgan has revised its economic growth forecast for China in 2025 from 4.1% to 4.8%, citing the anticipated boost from eased trade tensions and improved market confidence.
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