The Trump administration and China strike a bold 90-day trade deal, dramatically slashing reciprocal tariffs by 115% in what analysts call a “dream scenario” that sent global markets soaring.
Quick Takes
- U.S. tariffs on Chinese goods will drop from 145% to 30%, while China’s tariffs on American products will fall from 125% to 10%.
- Both nations agreed to implement these changes by Wednesday, with a 90-day window to negotiate longer-term arrangements.
- Markets responded enthusiastically, with significant gains in European and Asian markets, and U.S. stock futures indicating strong positive trends.
- The U.S. will maintain 20% tariffs on fentanyl-related products while pursuing broader trade stability.
- A formal mechanism for ongoing discussions will be established between top economic officials from both countries.
Dramatic Tariff Reductions Exceed Market Expectations
The United States and China have reached a significant trade agreement following intensive negotiations in Geneva, Switzerland. Both countries agreed to substantial tariff reductions for a 90-day period, effectively reversing the escalation that began when President Trump announced new tariffs on April 2. The deal reduces U.S. tariffs on Chinese goods from 145% to 30%, representing a 115% decrease. Similarly, China will slash its tariffs on American products from 125% to 10%, aligning with a uniform 10% base rate for both nations.
The scale of these reductions surpassed what analysts had anticipated, triggering immediate positive reactions across global financial markets. European and Asian markets posted significant gains, while U.S. stock futures indicated a strong opening. The U.S. dollar index rose by 1%, and the yield on the 10-year Treasury note increased by 6 basis points, further signaling market confidence in the deal. The effective U.S. tariff rate on Chinese imports has been reduced from 108.8% to 27%, a change that economists suggest will help ease inflationary pressures.
🚨 The US to cut tariffs on Chinese goods to 30% from 145% for 90 days.
Futures are up BIG pic.twitter.com/vWAt9CvVaL
— Crypto | Stocks | Freedom (@Wealthmanagerrr) May 12, 2025
Market Reactions and Economic Impacts
Financial experts have characterized the agreement as a major de-escalation in the U.S.-China trade war. Wall Street strategists are predicting further stock rallies, with U.S. stocks expected to outperform European markets in the immediate future. The reduction in trade tensions is anticipated to boost corporate confidence, potentially increasing inventory levels that had been depleted due to concerns over higher tariffs. The shipping and freight industries, which had experienced significant declines since April, are expecting a swift resumption of trade activities between the world’s two largest economies.
Notably, the U.S. will maintain higher tariffs of 20% on fentanyl-related products, reflecting ongoing concerns about illegal drug trafficking. Both countries have agreed to implement the tariff changes by Wednesday, creating an immediate impact on trade flows. The 90-day timeframe, while considered insufficient for developing a comprehensive long-term agreement, establishes clear pressure for continued negotiations and prevents indefinite uncertainty that has plagued markets over recent months.
Framework for Future Dialogue
The agreement establishes a mechanism for ongoing discussions about economic and trade relations between the two global powers. These talks will be led by Chinese Vice Premier He Lifeng, U.S. Treasury Secretary Scott Bessent, and U.S. Trade Representative Jamieson Greer. The negotiations may take place in China, the United States, or a mutually agreed-upon third country, with additional working-level consultations scheduled as needed to address specific issues.
Both countries have emphasized their commitment to developing a sustainable, long-term, and mutually beneficial economic relationship. The agreement follows years of trade tensions, during which China was the only nation to retaliate comprehensively against U.S. tariffs, leading to an escalating cycle of trade restrictions. The current deal represents the most significant step toward normalization of trade relations between the countries in several years, though analysts caution that fundamental differences on issues such as technology transfer, intellectual property protection, and market access remain to be addressed during the 90-day negotiation window.
Sources:
A ‘huge win’ for bulls: Markets soar on U.S.-China deal as Wall Street sees more upside
Reactions to US-China tariff cuts
US, China announce reduced tariffs for 90 days after trade talks
