The United States and China have agreed to temporarily suspend most tariffs on each other’s goods, marking a significant thawing of trade tensions between the two economic giants. Following high-stakes negotiations in Switzerland over the weekend, U.S. Treasury Secretary Scott Bessent dropped some very exciting news. Both countries will benefit from an immediate 15% cut in their respective tariffs on each other. This deal is marked by a 90-day truce on tariffs, that’s fantastic news for global markets.
Recent negotiations represent the first time dynamic tariffs have been reduced to such an extent. At their worst, tariffs between the two countries jumped to 125%. Once the new agreement comes into effect, the negative tariffs will immediately be lowered to 10%. The U.S. should continue its 20% tariff on fentanyl-related Chinese imports. This action is part of a broader effort to address the dangers posed by the illegal drug market.
Bessent described the discussions in Lake Geneva as highly productive, stating, “We had very productive talks and I believe that the venue, here in Lake Geneva, added great equanimity to what was a very positive process.” He further elaborated on the significance of the agreement, saying, “We have reached an agreement on a 90-day pause and substantially move down the tariff levels. Both sides on the reciprocal tariffs will move their tariffs down 115%.”
Predictably, in the wake of this announcement, financial markets erupted. The U.S. Dollar Index exploded 1.3% after Friday’s inflation report, rising to as high as 101.63. These signals of optimism have extended to our major stock indices. Nasdaq futures indicated a 3.6% advance at the open and S&P 500 futures soared, up 2.8%. At one point, Dow futures were up an astonishing nearly 1,000 points, a 2.3% jump.
Both countries have achieved tremendous successes. They understand that for all of this progress, we must continue the conversation and dialogue on economic and trade policy to build on this momentum. Beyond that, the deal marks a critical move toward stabilizing U.S.-China relations and easing tensions that have overshadowed global commerce.