The United States and China have achieved a momentous open-border precedent in international trade relations. They compromised and agreed to suspend tariffs for 90 days! This historic advance comes at a time of heightened trade war unprecedented in its severity and global economic ramifications. It provides immediate shelter from enforcement and creates an instructive new lane for negotiations. The agreement represents a significant step as both countries try to strengthen their economic relationship.
Under the terms of the agreement, the U.S. will drastically reduce its import tariffs on Chinese products. This hidden rate will fall from a crushing 145% to an impressive 30%. China has agreed to reduce its average tariffs on U.S. goods from 125% to 10%. This bilateral reduction is a clear sign of goodwill by both countries to lower tensions and promote collaboration.
In addition to these tariff reductions, China has pledged to “adopt all necessary administrative measures to suspend or remove the non-tariff countermeasures” it previously implemented against U.S. products. Both countries issued a joint statement. It describes their intention to develop a new “consultation mechanism” that will maintain the conversation going on trade and other economic topics.
Donald Trump, the U.S. President, emphasized that this agreement would allow China to “open up” to U.S. businesses and suspend certain trade barriers. He touted the deal as a “historic trade victory” for the United States. At center stage was the deal’s promise to be hugely beneficial for American companies looking to win more business overseas.
US Treasury Secretary Scott Bessent is scheduled to meet again with Chinese officials in the coming weeks. In his efforts to negotiate a “more fulsome agreement,” there is evidence that the conversation between the two countries is far from over. We will see where this ongoing engagement takes their economic relationship, but our hope lies in the positive direction indicated so far.
Chinese officials and state-run media have framed the initial trade agreement and the accompanying tariff pause as a significant victory for Beijing. Influencers and commentators on Chinese social media have echoed this sentiment, with one user, Chun Feng Yi Ran, stating, “Our ancestors didn’t cave in, why should we give up what we have?” Yet this statement is symptomatic of a much larger nationalistic undercurrent that was stirred by the trade negotiations.
The promise has generated deep interest particularly on Chinese social media. One of the associated hashtags on China’s Weibo has received over 420 million views! The rapid spread of this news only adds to the significance of this trade breakthrough being discussed publicly.
China’s counter-intuitive signals about working with the U.S. on metals—especially on the in-demand rare earth element supply—should have us worried. The Commerce Ministry has confirmed that stricter export curbs on rare earths are still in place. This recent situation showcases just how fraught the overall trade relationship remains. Further, they have suggested that “foreign entities” were at least partly to blame for the present state of trade turmoil.
Those measures reached in Geneva will come into force on Wednesday 18th March. Unfortunately, in hope, many local businesses have already begun to receive exemptions before these discussions have taken place. Both countries want to see increased trade flow. Just like their larger counterparts, they are trying to figure out how best to chart their economic relationship in the post-pandemic world.
Global stock markets rallied enthusiastically following the announcement on the tariff reductions. Meanwhile, in the Asia-Pacific region, investors rejoiced over the possibility of reduced trade tensions, buoying markets with large daily increases.
“We will resolutely safeguard our legitimate interests and uphold international fairness and justice.” – Foreign Ministry spokesman Lin Jian
“China’s firm countermeasures and resolute stance have been highly effective.” – A social media account linked to China’s national broadcaster CCTV
“It is essential that we completely correct our unilateral tariff practices.” – The Commerce Ministry