The United States and China have agreed to a truce to reduce import taxes on goods moving between the two countries, following the first wave of tariffs announced by US President Donald Trump.
The deal marks a significant de-escalation in the trade war between the world’s two largest economies, which has sent shockwaves through countless other countries around the world.
1. What has been announced?
Both the United States and China have confirmed they are reducing the tariffs they have imposed on each other since President Donald Trump initially escalated them earlier this year.
The deal sees both countries completely eliminating some tariffs and suspending others for 90 days, until May 14.
The result is that US tariffs on Chinese imports will be reduced from 145% to 30%, while Chinese tariffs on some US imports will be reduced from 125% to 10%.
China has also halted and eliminated other non-tariff countermeasures, such as the export of critical minerals to the US, that it put in place in response to the initial escalation.
The US measures still include an additional 20% rate aimed at pressuring Beijing to do more to curb the illegal trade in fentanyl, a powerful opioid drug.
The announcement came after talks between the two countries in Switzerland, the first between them since Trump triggered the latest tariff war.
2. What will happen after 90 days?
Trying to predict the next steps in this ongoing trade war between the US and China has been particularly difficult in recent months.
But it is a significant agreement between the world’s two largest economies and has been widely welcomed.
Even if the suspended tariffs are reinstated after 90 days, because the vast majority of tariffs announced after Liberation Day have been canceled, US tariffs on China will only increase to 54% and Chinese tariffs on the US will increase to 34%.
However, talks between the two governments are set to continue, so a further deal may be reached.
US Treasury Secretary Scott Besant said the consensus from both countries was that “neither side wants to decouple,” while China’s Ministry of Commerce said the agreement was a step to “lay the foundation for bridging differences and deepening cooperation.”
So US-China relations sound friendlier, but as we’ve seen so far during this Trump presidency, things can change quickly.
3. What goods do the US and China trade with each other?
In a word – a lot. In 2024, the largest category of goods exported by the US to China was soybeans – used mainly to feed China’s estimated 440 million pigs. The US also shipped pharmaceuticals and oil.
On the other hand, China exported large volumes of electronics, computers and toys.
The largest category of US imports from China is smartphones, accounting for 9% of the total. A large percentage of these smartphones are Apple iPhones that are made in China.
However, the US buys far more from China ($440 billion) than it sells to it ($145 billion), something that Trump has long been unhappy with.
His reasoning, in part, for imposing tariffs, and higher ones on countries that sell more to the U.S. than they buy, is to encourage American consumers to buy more American goods, increase the amount of taxes collected, and boost manufacturing jobs.
The escalating trade war in recent months has led to a collapse in the amount of goods transported across the Pacific Ocean, but investors believe the truce will lead to a recovery, with shares rising for some of the world’s largest shipping companies.
4. Has either side won?
Politicians on both sides have begun and will undoubtedly continue to claim victory over this deal.
Although the US and China call this agreement a joint one, people in Beijing will interpret it as the Trump administration’s withdrawal from tariffs, according to Janka Ertel, director of the Asia program at the European Council on Foreign Relations.
The US will argue that the tariff rate on Chinese imports, while lower, is still high at 30%.
Economists at Trust Economics have suggested that the tariff cuts, and last week’s UK-US agreement on them, mean there is both “a potential upper and a lower limit” to Trump’s tariffs.
The UK now has a global tariff rate of 10%. China now has a tariff rate of 30%. These two numbers now set the limits for the tariff rate corridor that the US tariffs will end up in this year.
