US and China agree to lower tariffs for 90 days

The US and China on Monday agreed to lower tariffs for 90 days, as the world's two largest economies continue with discussions in a move that has boosted global stock markets and oil prices. US levies on Chinese imports will be reduced to 30 per cent from 145 per cent during the three-month period, while the 125 per cent tariffs imposed by China on US goods will be cut to 10 per cent, officials said in Geneva on Monday. The 90-day period will allow the countries to hammer out further economic and trade details, and the tariff revisions from both sides will be in force by May 14, the White House said in a statement. “The US will continue a strategic rebalancing in many areas that were exposed as supply chain weaknesses during Covid, whether it’s medicines, semiconductors, steel or other [areas],” said US Treasury Secretary Scott Bessent, in Geneva. “We have identified five or six strategic industries or supply chain vulnerabilities and we will continue moving towards US independence or reliable supplies from allies on those, but the consensus from both delegations this weekend is neither side wants a decoupling.” The result of the very high tariffs was an equivalent of an embargo and neither side wants that, he said. “We do want trade, we want more balanced trade, and I think that both sides are committed to achieving that. We would like to see China open to more US goods,” Mr Bessent told reporters. “We expect that, as the negotiations proceed, there will also be a possibility of purchase agreement to pull what is our largest bilateral trade deficit into balance.” Currently, the US imposes a 10 per cent universal tariff plus sector-specific charges on all countries. The tariffs announced by US President Donald Trump last month have led to protests from US consumers and warnings from the business sector. The move raised the spectre of a global recession and dragged US gross domestic product 0.3 per cent lower in the first quarter of the year – its first contraction in three years. Reduction in tariffs marks "a significant de-escalation in the trade conflict and a positive development for US-China trade relations, although the outcome of the upcoming negotiations is subject to a high degree of uncertainty and could involve some back and forth over the coming months," Julius Baer economist Sophie Altermatt, told The National . Monday's announcement, which follows the US talks with Chinese officials on Sunday, resulted in stocks surging in Asia and Europe, while oil prices were trading more than 3 per cent higher. In the US, the S&P 500 shot up 3.3 per cent to pull back within 5 per cent of its all-time high set in February. The Dow Jones Industrial Average jumped 1,160 points, or 2.8 per cent and the Nasdaq composite climbed 4.3 per cent. The dollar rallied and gold prices fell after Mr Bessent summed up the trade discussions as “robust and productive”. Brent, the benchmark for two thirds of the world's oil, was trading 3.04 per cent higher to $65.85 a barrel at 1.49pm UAE time. West Texas Intermediate, the gauge that tracks US crude, leapt 3.28 per cent to $63.02 a barrel. Meanwhile, gold, a hedge against stocks and the crude markets volatility, dropped 3 per cent to a more than one-week low. “Throughout the trade process, we have had a plan, we have a process in place, and now, with the Chinese, after this weekend we have a mechanism for continued talks,” Mr Bessent said. The move has helped to shift market sentiment on trade and the global economy to a much more positive footing, said Edward Bell, acting group head of research and chief economist at Emirates NBD. “US equity futures have jumped higher in response to the news of the tariff delay while European and Asian markets have also been pushed higher. Bonds and gold have been selling off as investors shed haven assets and position for further risk-on moves,” he said in a research note. Also, as an immediate impact of the US-China cooling of trade hostilities, the outlook for oil prices has “improved” provided the trade deal sticks, although “fundamentals still suggest prices can’t rally too much in 2025", he added. Mr Trump’s 20 per cent fentanyl-related tariffs on China, which were imposed in February and March, will remain, as part of the latest discussions, according to US Trade Representative Jamieson Greer. “Other measures that the US has put in place in the past, whether it’s tariff measures from 2018, or since, tariffs under other statutory authorities, tariff related to fentanyl … those remain unchanged for now,” he said. He added that the US and China have agreed to constructively work together on fentanyl with “a positive path forward”. Washington accuses Chinese companies of producing the chemicals used to make the drug. While the Middle East economies are not directly connected to the US-China deal, an easing in global trade tensions is a positive for the trade-dependent economy of the UAE , according to Mr Bell. “It can allow firms to deepen trading routes, making use of the country’s logistics infrastructure and networks,” he said. “Regional growth is largely being driven by domestic spending on projects in the UAE and Saudi Arabia. Improvements in the global trading environment will be welcomed by local firms.”

US and China agree to lower tariffs for 90 days

Move by world's two largest economies boosts stocks and oil prices