US, China agree to halt tariffs in bid to defuse trade war

The United States and China have reached an agreement to temporarily reduce the punishing tariffs they have imposed on each other while they try to defuse the trade war threatening the world’s two largest economies.

In a joint statement, the countries said they would suspend their respective tariffs for 90 days and continue negotiations they started this weekend.

Under the agreement, the United States would reduce the tariff on Chinese imports to 30% from its current 145%, while China would lower its import duty on American goods to 10% from 125%.

“We concluded that we have a shared interest,” Treasury Secretary Scott Bessent said at a news conference in Geneva where U.S. and Chinese officials met over the weekend. “The consensus from both delegations is that neither side wanted a decoupling,” he said.

China said it will suspend or revoke countermeasures adopted in retaliation for escalating tariffs. In early April, the Chinese government had ordered restrictions on the export of rare earth metals and magnets, critical components used by many industries, including automakers, aerospace manufacturers and semiconductor firms.

Bessent said the two countries may discuss purchase agreements of American goods by the Chinese government. Such a deal could help narrow the American trade deficit with China.

The agreement, for now, breaks an impasse that had brought much trade between China and the United States to a halt. Many American businesses had suspended orders, holding out hope that the two countries could strike a deal to lower the tariff rates.

Economists had warned that the trade dispute will slow global growth, fuel inflation and create product shortages, potentially tipping the United States into a recession.

Chinese factories also experienced a sharp decline in export orders to the United States, heaping additional pressure on a sluggish economy. Chinese producers looked to expand trade to Southeast Asia and other regions to circumvent the U.S. tariffs.

While a temporary reprieve from the shockingly high tariffs is cause for celebration for businesses in both countries, the repercussions will linger. Businesses will likely encounter a flood of pent-up demand, leading to soaring transport prices, as companies race to schedule shipments during the 90-day negotiating window to take advantage of the lower tariff rates.

Global markets jumped on the announcement. The benchmark index in Hong Kong surged 3%, about the same amount as S&P 500 stock futures.