Thanks to an outpouring of advocacy, the United States and China recently reached a short-term trade agreement. This deal will more than double tariff elimination between the two countries. For the U.S. side, this deal primarily aims to reduce trade tensions. It will begin on Wednesday and run for 90 days. Under the terms of the deal, the U.S. would temporarily reduce tariffs on Chinese imports. They are set to be slashed to 30%, a drastic decline from the former rate of 145%.
In response, China has agreed to suspend or remove the non-tariff countermeasures it imposed on U.S. goods since April 2. This development marks a significant step in trade relations between the two countries, which have been strained over various economic issues. The compromise came amid contentious discussions at high-level UN talks in Geneva, Switzerland, over the weekend.
Recently, President Donald Trump announced a large policy shift in favor of trade protectionism. The U.S. will reduce its own “reciprocal” tariffs on China to 10%. The U.S. will maintain a 20% tariff on certain products. This value-add measure particularly targets items aimed at addressing China’s alleged role in flooding America with fentanyl. The U.S. will keep existing tariffs that were imposed during the trade war on certain Chinese products, including steel and aluminum.
Beijing has committed to reducing tariffs on U.S. goods from the current 125% back down to 10%. Trump was careful to note that all of these commitments were made, but not yet signed in blood. He conveyed a potentially cautious optimism about the state of the negotiations, declaring, “They’ve agreed to open up China.”
In fact, Trump’s one warning shot concerning the tentative agreement foreshadowed all of this. As he explained, if certain milestones are not achieved, tariffs on Chinese imports will be doubled. He recognized that although the initial agreement looks hopeful, more negotiations are needed to make these terms concrete.
“We have to get it papered.” – President Donald Trump
This smart agreement has come on the heels of a barrage of trade barriers. These barriers had largely created a de facto trade embargo between the U.S. and one of its biggest suppliers. The array of tariffs recently imposed by the Trump administration starting in April had injected huge discord into the relationship and called for quick negotiations to help resolve them.