US-China Trade War Pauses: Both Sides Mutually Reduce Tariffs by 115% – US Down to 30%, China Down to 10%

The United States and mainland China held two days of economic and trade negotiations in Geneva, Switzerland, and issued a joint statement on local time May 12th, announcing that both sides will temporarily suspend the imposition of some tariffs for 90 days to ease heightened trade tensions and pave the way for subsequent negotiations.

Both Sides Mutually Reduce Retaliatory Tariffs by 115 Percentage Points

According to the joint statement and US media reports, effective immediately, the overall 145% tariffs previously imposed by the US on Chinese goods will be reduced to 30%; China’s tariffs on US goods will decrease from 125% to 10%. The portion mutually reduced covers the 115% retaliatory reciprocal tariffs imposed by both sides and will last for 90 days.

US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer stated at a joint press conference in Geneva that both sides agreed to temporarily suspend reciprocal retaliatory tariff measures and emphasized that this move demonstrates a substantive and constructive spirit of dialogue, which will help prevent further escalation of trade conflicts.

Background to the Tariff Dispute: From Fentanyl Tax Onset to Retaliatory Escalation

This round of trade tensions originated from the Trump administration’s accusations since early 2025 that China had not effectively curbed the flow of fentanyl-like opioid drugs into the United States, leading to a 20% “fentanyl tariff” imposed on Chinese goods in February. Subsequently, on April 2nd, a 34% “reciprocal tariff” measure was announced targeting multiple countries, including China.

China swiftly retaliated, imposing proportional retaliatory tariffs on US goods, ultimately raising tariffs on both sides to 125%, causing global supply chain disruptions and market unease.

According to analyses by CNN and The Wall Street Journal, this agreement will reduce the original 125% reciprocal tariffs to 10%, but the 20% special tariff targeting fentanyl issues will remain unchanged. Both sides also agreed to remove the 91% additional tariffs imposed since April, while maintaining the 10% tariff rate for policy flexibility.

Content of the US-China Joint Statement: Both Sides Pledge Concrete Actions

According to the Joint Statement of the China-US Geneva Economic and Trade Consultations released by China’s official Xinhua News Agency, both sides reached the following consensus and pledged to implement it before May 14, 2025:

United States Side:

1. In accordance with Executive Order 14257 signed on April 2, 2025, the ad valorem additional tariff rate imposed on goods originating from China (including Hong Kong and Macau) will be temporarily suspended by 24% for 90 days, with the remaining 10% additional tariff retained.
2. Executive Orders 14259 and 14266 issued on April 8 and 9, 2025, regarding additional ad valorem tariffs on Chinese goods, will be revoked.

China Side:

1. In accordance with Announcement No. 4 of the State Council Tariff Commission [2025], the ad valorem additional tariff rate imposed on US goods will also be temporarily suspended by 24% for 90 days, with the remaining 10% retained; simultaneously, the revised tariff rates on US goods in Announcements No. 5 and No. 6 will be revoked.
2. All necessary administrative measures will be taken to suspend or revoke non-tariff countermeasures implemented since April 2, 2025.

Establishment of a Continuous Consultation Mechanism, Meetings Can Be Held in Third Countries

The joint statement also announced that both sides will establish a continuous economic and trade consultation mechanism, with Chinese Vice Premier He Lifeng serving as the representative on the Chinese side, and US Treasury Secretary Bessent and Trade Representative Greer jointly responsible on the US side.

Future consultations will be held alternately in China, the United States, or a third country agreed upon by both parties, and working-level meetings can be convened as needed to address specific issues.

Substantive Discussions on the Fentanyl Issue Underway

According to The New York Times, both sides also held substantive discussions on the fentanyl issue during this round of negotiations. Bessent stated that the Chinese side has understood the US’s serious concerns about the fentanyl crisis and pointed out that both sides demonstrated a spirit of “mutual understanding and mutual respect” during the negotiations. Greer said that the communication between the two sides on this issue was sincere and constructive.

Rare Earth Export Controls Not Included in US-China Agreement, China’s Countermeasures Still Loom

Although the US and China have reached a 90-day agreement on tariff suspension, the dispute over rare earth exports remains unresolved. Last month, on April 4th, China’s Ministry of Commerce and the General Administration of Customs jointly issued an announcement imposing export controls on seven categories of medium and heavy rare earth-related items, including Samarium, Gadolinium, Terbium, Dysprosium, Lutetium, Scandium, and Yttrium, effective from the date of the announcement. This move is widely seen as a response to the US’s imposition of “reciprocal tariffs,” although the announcement itself did not explicitly name the United States.

This measure is a general export control applicable to all countries and was not mentioned in the US-China Geneva economic and trade agreement, leaving uncertainty as to whether this issue constitutes a countermeasure against the US. According to previous reports by Reuters, due to bilateral trade tensions, US companies may face longer review times and greater uncertainty when applying for relevant rare earth export permits.

Market Response and Future Prospects

According to a Reuters analysis, this trade dispute has stalled up to $600 billion in bilateral trade, disrupted supply chains, and triggered concerns about corporate layoffs and global stagflation.

Although the 90-day period is only a temporary buffer, it is widely believed that this move provides an opportunity to thaw bilateral relations. NHK commentary pointed out that this agreement allows both sides to temporarily ease the abnormal situation of imposing over 100% tariffs on each other and is an important step in restoring trust.

(Image source: Associated Press)

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