90 Day Tariff Reduction Offers Temporary Relief in US-China Trade Dispute

The U.S.-China trade war experiences a pivotal turning point as both nations slash tariffs in a 90-day agreement, igniting hopes for a more stable economic future.

At a Glance

The Trump administration announces a 90-day tariff reduction with China, slashing previously steep tariffs.
Global stock markets responded positively, with rallies seen across Europe, Asia, and positive trends predicted in the U.S.
The agreement is seen as a strategic move that maintains negotiation pressure while fostering economic dialogue.
A mechanism for ongoing economic discussion between the two countries is established for sustainable trade relations.

Temporary Relief in a Prolonged Trade Dispute

In a significant development, the Trump administration declared a dramatic easing of trade tensions with China, cutting down reciprocal tariffs from over 100% to a manageable 10% for the next 90 days. While the agreement maintains existing 20% tariffs on fentanyl-related imports, the bulk reduction marks a critical de-escalation in the volatile trade saga. The deal, however, is temporary, underscoring its intent to uphold pressure for a more comprehensive, long-term resolution.

Global stock markets positively reacted to the announcement. European and Asian stock rallies signaled renewed hope for economic stability, while U.S. stock futures suggested an impending rise. Analyses from Deutsche Bank described the agreement as exceeding previously constructive expectations, fostering confidence among investors and signaling a fleeting but crucial “risk-on” market sentiment.

U.S. AND CHINA TO CUT TARIFFS, EASING TRADE TENSIONS

The U.S. and China agreed to sharply reduce tariffs, signaling a shift from conflict to cooperation between the world’s top economies.

Key points from Geneva talks:

🔸 Trump’s tariff on Chinese goods drops to 10% from 125%.…

— *Walter Bloomberg (@DeItaone) May 12, 2025

Analysts’ Perspectives and Market Impact

Analysts have lauded the move, with many viewing it as beneficial for stocks and U.S. assets. “The magnitude of this tariff reduction is larger than expected,” noted Tai Hui, illustrating the potential for significant market reprieve. Despite the temporary nature of the agreement, Wall Street strategists remain optimistic, predicting that U.S. stocks will likely outperform their European counterparts.

“Overall, we expect the market to get back on to a risk-on sentiment in the near term” – Tai Hui

The dollar index benefited from the news, rising by 1%, while the U.S. 10-year Treasury note yield saw an increase of 6 basis points. This uptick reflects a renewed confidence in U.S. economic positioning post-agreement. Nevertheless, the deal has its skeptics, who question the 90-day timeframe’s adequacy in crafting a sustainable solution to multifaceted trade conflicts.

Future Negotiations and Economic Diplomacy

A framework for continued dialogue has been set, with Chinese Vice Premier He Lifeng and U.S. representatives Scott Bessent and Jamieson Greer leading discussions. This mechanism is an acknowledgment of economic diplomacy’s significance, aiming to evolve beyond the immediate 90-day deadline. Both countries have committed to alternate discussions between nations or in a neutral location, indicating an ongoing dedication to resolving their economic differences.

“Today’s announcement even exceeds our constructive expectations” – strategists at Deutsche Bank

The agreement arrives at a crucial juncture, post an intense trade war that markedly strained global commerce. With China as the sole nation retaliating against U.S. tariffs, escalating rates contributed to a sharp trade environment. This tentative agreement promises not only de-escalation but the prospect of refreshed economic engagement, fostering optimism in curtailing the trade tensions’ broader impacts.