A deal has been announced.
The United States and China announced on Monday that they have agreed to a 90-day suspension of most tariffs introduced in recent months, boosting investor confidence and pushing markets higher amid optimism that tensions between the world’s largest economies may be easing.
As part of the temporary truce, the average U.S. tariff on Chinese goods will drop to 30% from a peak of 145%, while China will lower its tariffs on American products to 10% from 125%, according to a joint statement.
This agreement followed face-to-face negotiations between officials from both countries in Geneva over the weekend, marking the first direct discussions since President Donald Trump unexpectedly enacted steep import duties last month, beginning with 84% and escalating to 145%.
The newly established 30% U.S. tariff rate results from a combination of earlier measures, including a 20% penalty related to China’s response to fentanyl trafficking and a general 10% tariff imposed on all trading partners.
The news drove a sharp rally in financial markets on Monday, with the S&P 500 gaining 2.6%, the Dow Jones Industrial Average climbing over 1,000 points, and the Nasdaq rising 3.5%. However, some analysts remained cautious. Goldman Sachs noted that tariffs are still substantially higher than before Trump’s presidency, suggesting that elevated prices for U.S. consumers are likely to persist. They also pointed out that the 90-day window could prolong uncertainty for businesses and investors.
The U.S. trade imbalance with China remains the largest among all its partners, and Trump has consistently criticized Beijing for what he sees as exploitative trade behavior. In response to U.S. tariffs, China had implemented its own set of retaliatory measures, intensifying the economic conflict.
U.S. Trade Representative Jamieson Greer described the Geneva talks as “constructive and positive,” adding that China appeared ready to negotiate in earnest. Treasury Secretary Scott Bessent echoed this sentiment, saying both sides were committed to more balanced trade and preferred collaboration over economic confrontation.
Criticism over the strategy behind the tariffs was dismissed by Bessent, who argued that prior efforts to address trade issues through conventional diplomatic channels had failed. He emphasized that the recent breakthrough has established a framework to avoid further tariff escalation. China’s Ministry of Commerce hailed the agreement as a significant milestone, expressing hope that the U.S. would continue working cooperatively to end unilateral trade penalties.
U.S. stock futures jumped following the announcement, with all major indexes showing strong gains. Asian and European markets also responded positively, particularly Hong Kong’s Hang Seng Index, which surged over 3%.
The two nations also agreed to create a structure for ongoing discussions on trade and economic matters. Meetings may alternate between the U.S., China, or a mutually agreed third country. Greer and Bessent will continue leading the American delegation, while Chinese Vice Premier He Lifeng will represent Beijing.
Bessent noted that additional negotiations are expected soon. He emphasized that while certain tariffs—including those tied to fentanyl concerns and others from Trump’s previous term—will remain in place, separate discussions on those topics are progressing well.
Speaking on CNBC, Bessent said China now seems committed to curbing the flow of fentanyl precursors into the U.S. He also clarified that the Biden administration is not seeking a full economic decoupling from China. Instead, a “strategic decoupling” is underway, focusing on building domestic resilience in sectors like semiconductors, steel, and pharmaceuticals.
The tariff war’s impact has already been visible in declining shipping activity from China to the U.S. Danish shipping giant Maersk welcomed the agreement, calling it a positive development that could pave the way for a long-term resolution.
Tianchen Xu of the Economist Intelligence Unit said the agreement would bring significant relief to small and medium-sized businesses on both sides of the Pacific, especially Chinese exporters who had been losing American orders. U.S. buyers also benefit from avoiding additional import costs, a boost to the broader economy and labor market.
Wang Wen of Renmin University described the deal as a morale booster globally but warned that unresolved issues could reignite trade tensions. Both Xu and Wang emphasized that sustained progress will require skillful diplomacy from both governments.
Ahead of the talks in Geneva, President Trump signaled openness to reducing tariffs to 80%, referencing the proposal on his Truth Social account. When asked about the possibility of cutting tariffs, he responded, “It could be,” adding, “You can’t get any higher. It’s at 145, so we know it’s coming down.”
He concluded optimistically: “I think we’re going to have a very good relationship.”
