The United States and China have agreed to a deal to temporarily slash tariffs, sending the dollar soaring and financial markets into a frenzy.
The world’s two largest economies have been locked in a bitter trade war for years. Each side imposed crippling tariffs that disrupted global supply chains.
The latest deal was struck in Geneva and promises a 90-day pause on tariff escalations. Reciprocal duties are dropping by over 100 percentage points to a 10% baseline rate. The United States is set to slash tariffs on Chinese imports from 145% to 30%. Likewise, China will also cut tariffs on U.S. goods from 125% to 10%.
The announcement has already boosted financial markets, with Chinese stocks opening higher and the dollar strengthening. Wall Street is celebrating, with stock futures climbing and the dollar strengthening against major currencies.
This isn’t the first time Washington and Beijing have attempted to mend their fractured trade relationship. The Trump administration’s aggressive tariff hikes attracted retaliatory measures from China, which brought nearly $600 billion in two-way trade to a standstill.
President Donald Trump’s second term in office reignited the tariff war, pushing rates to a staggering 145% on Chinese imports. China responded with export curbs on rare earth elements, vital for US manufacturers, and raised tariffs on American goods to 125%.
While China seeks to avoid further economic strain, the United States wants to stabilize markets. However, unless deeper structural issues are addressed, we could be right back in the trenches of a trade war before the ink on this agreement even dries.
