After months of escalating trade tensions, the United States and China have agreed to a significant, if temporary, reduction in tariffs, offering global markets a much-needed breather. The deal, announced Monday after a weekend of negotiations in Geneva, will see both countries cut tariffs on each other’s goods for 90 days, marking the first major thaw in the trade standoff since April.
For US companies and investors, this development is more than a diplomatic gesture. The US will lower its tariffs on Chinese imports from a punishing 145% to 30% for the next three months. China, in turn, will drop its tariffs on American goods from 125% to 10% over the same period. The reductions are set to take effect by Wednesday, giving businesses on both sides a brief window of relief as talks continue.
The agreement follows a series of tit-for-tat tariff hikes that began in early April, when President Donald Trump imposed a 34% tariff on Chinese products. China responded in kind, and the situation quickly escalated, with both countries ratcheting up tariffs to levels that many economists considered unsustainable. The new deal effectively rolls back those increases, though it leaves a baseline tariff of 10% in place for now.
The breakthrough came after high-level talks involving Chinese Vice Premier He Lifeng, US Treasury Secretary Scott Bessent, and US Trade Representative Jamieson Greer. Both sides emerged from the weekend with a more conciliatory tone than in previous months. Bessent described the negotiations as “substantial progress,” while Chinese officials called the agreement “an important step for the two sides to resolve differences through equal dialogue and consultation”.
This change in approach was not widely expected. Just a week ago, US negotiators had signaled that their main goal was simply to de-escalate tensions, rather than to strike a major deal. The rapid progress suggests that both sides recognized the economic risks of letting the trade war drag on.
Financial markets responded positively to the news. The US dollar strengthened against major currencies, and global equities rallied as investors bet that the risk of a recession had receded, at least for now. For multinational companies and exporters, the tariff reductions mean lower costs and less uncertainty, though the relief may be short-lived if the two countries fail to reach a longer-term agreement.
The deal also includes a commitment from China to suspend or remove non-tariff countermeasures it had imposed since April. This should further ease the burden on American exporters, particularly those in industries like agriculture and manufacturing that have been hit hard by the trade dispute.
The agreement is strictly temporary. If no further deal is reached within the 90-day window, tariffs could snap back to previous levels. For the US, that would mean a return to a 145% tariff on Chinese goods; for China, a 125% rate on American imports. Both sides have agreed to establish a formal mechanism for ongoing trade discussions, signaling that negotiations will continue at a high level.
While the reduction in tariffs is a clear positive for business, the underlying issues that sparked the trade war-intellectual property, technology transfer, and market access-remain unresolved. The next three months will be critical for determining whether this truce can be converted into a lasting peace.
For investors tracking the situation, the stock symbol to watch is the S&P 500 (NYSE: SPX), which has historically been sensitive to developments in US-China trade policy. Companies with significant supply chain exposure to China, as well as exporters in both countries, are likely to see the most immediate impact.
The 90-day tariff reduction is a welcome pause in a costly trade war. Whether it marks the beginning of a broader resolution or just a temporary ceasefire remains to be seen. For now, businesses and markets are enjoying the reprieve, but the clock is already ticking on the next round of negotiations.
