You've likely heard the big news. This article helps you understand more details about the US-China Geneva trade talks statement.
https://www.mofcom.gov.cn/xwfb/ldrhd/art/2025/art_8055948aadb5450598bf73d1aae6828e.html
Specific Tariff Adjustment Measures
U.S. side: The U.S. will modify the ad valorem tariffs on Chinese goods imposed under Executive Order 14257 of April 2, 2025, suspending 24% of the tariff for an initial 90 days while retaining the remaining 10% tariff under that order; and cancel the additional tariffs imposed under Executive Orders 14259 (April 8, 2025) and 14266 (April 9, 2025) on these goods.
Chinese side: China will correspondingly modify the ad valorem tariffs on U.S. goods imposed under Tariff Commission Announcement No. 4 of 2025, suspending 24% of the tariff for an initial 90 days while retaining the remaining 10% tariff, and cancel the additional tariffs imposed under Announcements No. 5 and No. 6 of 2025; and take necessary measures to suspend or cancel non-tariff countermeasures against the U.S. initiated since April 2, 2025.
Magnitude and Duration of Tariff Adjustments
Adjustment magnitude: According to sources, the tariff reduction by both sides exceeds 100%. Specifically, the U.S. tariff rate on Chinese imports drops sharply from 145% to 30%, and China's tariff on U.S. products falls from 125% to 10%.
Timeframe: Some of the above tariff adjustments are effective for 90 days, starting from May 12, 2025, during which part of the tariffs are suspended. After 90 days, the two sides will decide whether to extend or adjust the tariff policy based on further negotiations.
Consensus and Mechanism Building
Establishing a consultation mechanism: Both sides agreed to establish a US-China economic and trade consultation mechanism to maintain close communication on respective concerns and conduct further consultations. Consultations will be held regularly or irregularly in China, the U.S., or a mutually agreed third country. Working-level consultations on specific trade issues can be held as needed.
Consensus reached: Both sides recognize that bilateral trade relations are crucial to the two economies and the global economy, and acknowledge the importance of sustainable, long-term, and mutually beneficial trade ties. They will continue to advance work in a spirit of mutual openness, continuous communication, cooperation, and mutual respect. The results of this round of talks mark an important step in resolving concerns in the trade area.
Impact on Bilateral Trade and Global Economy
Easing trade tensions: The tariff adjustments significantly reduce bilateral trade costs, helping restore and promote trade flows between the two countries, easing the trade tensions caused by high tariffs, and benefiting businesses and consumers on both sides.
Stabilizing global supply chains: As the world's two largest economies, the easing of trade relations between the U.S. and China is important for stabilizing global industrial and supply chains, reducing trade uncertainty, boosting global market confidence, and supporting global economic recovery and growth.
Boosting market confidence: The positive outcome of the talks has temporarily eased market risk aversion. After the joint statement, U.S. and Chinese stock index futures rose, the yuan appreciated while the dollar index also rose, gold fell, and earlier safe-haven trades reversed in the short term.
But it's worth noting that during the 2018 US-China trade war, the two sides reached multiple agreements or consensus, only to see defaults or incomplete implementation.
May 2018: Initial Consensus Followed by U.S. Default
On May 19, 2018, the U.S. and China issued a joint statement announcing a halt to additional tariffs and agreeing to resolve differences through negotiations. Just over a month later, the U.S. reneged on the consensus and unilaterally escalated tariff measures, leading to a breakdown in talks.
December 2018: Ceasefire Agreement and Subsequent Events
On December 1, 2018, the U.S. and Chinese leaders met at the G20 in Argentina and reached a temporary ceasefire, agreeing to stop escalating tariffs. The U.S. postponed the planned increase from 10% to 25% on $200 billion of Chinese goods scheduled for January 1, 2019, and both sides launched a new round of negotiations.
Escalation Again and Reasons
In May 2019, the U.S. claimed China had not fulfilled its commitments and imposed additional tariffs, escalating trade frictions again. Regarding the defaults after the 2018 trade war agreements, the two sides hold different views:
U.S. Perspective
The U.S. argued that China did not meet its purchase commitments, calling it a "failure to meet targets," and even suggested that China deliberately delayed.
Chinese Perspective
Force majeure: China believed it tried its best to implement the agreement but was unable to fully meet targets due to force majeure factors such as the pandemic.
U.S. unfulfilled promises: The U.S. did not fully implement its commitments under the agreement, such as obligations on technology transfer, financial services, and exchange rates.
Regardless of whether Democrats or Republicans are in power, the lack of basic trust between the U.S. and China makes it easy for both sides to generate suspicion and misunderstanding during implementation, hindering effective execution.
The tariff issue is not fully resolved; the current effective tariff rate may still be around 30%. But for now, the relief gives asset prices a breather. The situation still needs close monitoring going forward.
