US and China strike deal to slash tariffs
By Abigail Townsend
Date: Monday 12 May 2025
(Sharecast News) - The US and China are to significantly lower tariffs, it was confirmed on Monday, after a key agreement was struck in Geneva over the weekend.
The world's two largest economies will now cut levies for the next 90 days. Washington will reduce tariffs on Chinese goods to 30% from 145%, while Beijing will lower duties to 10% from 125%.
Equities rallied on the news, while the dollar extended gains against the euro and yen. Gold, a safe-haven asset that has soared in recent weeks, fell back.
As at 1230 BST, Dow Jones futures were trading 2% higher.
Speaking at a press conference in Geneva, US Treasury secretary Scott Bessent said: "We want more balanced trade, and I think both sides are committed to achieving that.
"Neither side wants to a decoupling."
He added that the two sides now had a "mechanism for continued talks".
In Beijing, China's state broadcaster CCTV called the talks "candid, in-depth and constructive". Official media reports also noted that further discussions "on issues of mutual concern" were now expected.
The talks were the first formal negotiations held since Donald Trump upended world markets on 2 April, when he unveiled his sweeping global tariff regime. China retaliated with its own swingeing tariffs on US imports, prompting wide-spread fears of all all out global trade war, leading to higher inflation and depressed growth.
In Europe, Danish shipping giant Maersk welcomed the deal. "We hope it can lay the foundation for both parties to also reach a permanent deal that can create the long-term predictability our customers need.
"Right now, our customers have gotten 90 days of clarity with reduced tariffs and we ar working hard to help them make the best use of this window."
Maersk was one of the biggest climbers in Europe following the announcement. As at 1230 BST, the stock had put on 13%.
In the US, most of Wall Street's biggest names - all with global manufacturing operations and markets - were higher in pre-market trading. Chip maker Nvidia was up 5%, Apple 7%, Elon Musk's Tesla 8%, Facebook-owned Meta Platforms 6% and Nike also 6%.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "The pause button has once again been pressed on the most onerous tariffs threatening the world economy.
"The most immediate relief for American businesses will come from the easing of supply chain snarl-ups, as some flows of products have been frozen, with goods held on ships or in warehouses. Concerns about the sharply higher cost of imports are also likely to be in retreat."
Russ Mould, investment director at AJ Bell, said: "While the trade spat has only been dialled back for 90 days, it's a major breakthrough as far as investors are concerned.
"The next 90 days are going to be crucial in determining the longer-term tariff levels between the two countries. It would only take China upsetting Trump once for him to rip up the 90-day deal and revert to sky-high deals. China won't want to come across as weak in any discussion, and is certainly not a push over - yet it will be cognisant of the situation's fragility."
Lynn Song, chief economist, Greater China, at ING, said: "Although the de-escalation of the trade war benefits both economies, the agreement - which significantly lowers tariffs without any concessions - is likely to be viewed as a particular victory for China.
"In terms of impact on China's growth, the 90-day ceasefire will upgrade our second and third-quarter growth outlook. We suspect that China's May and June exports to the US will bounce back sharply, as importers with depleted inventories take advantage of the ceasefire to resume imports."
Neil Wilson, UK investor strategist at Saxo Markets, said: "The de-escalation seems better than just about anyone could hope for.
"This is buying time for a more comprehensive deal, [and] allows time for the process and mechanism, in the worlds of Bessent, to take place.
"He also stressed that strategic rebalancing of the global economy is still underway, although 'neither side want a decoupling', which is the sort of commentary the market is going to lap up. But it is not true - the US is absolutely trying to decouple."
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