US-China Tariff Truce: A New Dawn or Just a Temporary Pause?

A recent truce between the US and China has marked a significant de-escalation in their ongoing trade war, reducing import taxes on goods and impacting the global economy. This agreement comes as both countries have agreed to cancel some tariffs entirely while suspending others for a period of 90 days, effective until May 14. This means that additional US tariffs on Chinese imports will drop from 145% to 30%, whereas recently increased Chinese tariffs on US imports will decline from 125% to 10%.

The deal also sees China lifting a ban on essential minerals exported to the US, which were restricted in response to previous tariffs. However, some US tariffs, including a 20% charge aimed at addressing the illegal fentanyl trade, will remain.

The announcement followed high-level talks in Switzerland, marking the first such discussions since the recent trade tensions escalated under President Trump. As this evolving saga unfolds, predictions remain challenging, but analysts view this agreement as a crucial step toward reducing trade tensions. Although a return to previous tariff levels after 90 days is possible, the agreement means that should tariffs increase, they would only rise to 54% for US goods and 34% for Chinese goods.

Both sides signal a desire for continued negotiations, with US Treasury Secretary Scott Bessent stating that neither country desires economic decoupling. In 2024, the US exported soybeans, pharmaceuticals, and petroleum to China, while China’s exports to the US include smartphones. However, the US consistently imports more from China than it exports, leading to frustration from the Trump administration, who introduced tariffs to push American consumers towards domestic products.

Following recent discussions, experts believe a rebound in trade volumes is likely, with shipping stocks seeing an uptick. While politicians may claim victory on both sides, interpretations of this truce differ, particularly in Beijing, where it may be seen as a retreat by the Trump administration. Economists suggest tariffs could stabilize within a certain range, establishing a new norm in US-China economic relations and transitioning from one of the most imbalanced trade relationships to a slightly more moderated one.