Scott Bessent, right, and U.S. trade representative Jamieson Greer in Geneva on May 12. Photographer: Fabrice Coffrini/Getty Images.
The United States and China will temporarily lower tariffs on each other’s products in a dramatic ratcheting down of trade tensions that buys the world’s two largest economies three months to work toward a broader agreement. The combined 145 percent U.S. levies on most Chinese imports will be reduced to 30 percent by tomorrow, while the 125 percent Chinese duties on U.S. goods will drop to 10 percent, according to a joint statement and from officials in a briefing Monday in Geneva.
“Both sides agree we do not want a generalized decoupling,” Treasury Secretary Scott Bessent said in a Bloomberg Television interview yesterday. “The U.S. is going to do a strategic decoupling in terms of the items that we discovered during Covid were of national security interest—whether it’s semiconductors, medicine, steel,” he said.
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Bessent’s overtures to ease trade tensions with China come less than six weeks after President Donald Trump’s “Liberation Day” announcement April 2 of so-called reciprocal tariffs on dozens of countries. The retaliation that followed took duties to levels that for many companies effectively blocked trade and caused widespread uncertainty that could be sustained if talks don’t keep progressing.
Bessent said it’s “implausible” to think that reciprocal tariffs on China might end up below 10 percent, but the April 2 level—set by President Trump at 34 percent—“would be a ceiling.” He also said that “we could see some amount of the fentanyl tariffs perhaps come off,” if there were “excellent engagement” from Beijing on solutions toward solving that crisis. Trump put a 20 percent surtax on China earlier this year over fentanyl concerns. Speaking to reporters earlier in Geneva, the Treasury chief said, “We expect that as the negotiations proceed, there will also be the possibility of purchase agreements to pull what is our largest bilateral trade deficit into balance.”
Bessent added that the tariff reductions don’t apply to sectoral duties imposed on all U.S. trading partners, and that the tariffs applied on China during the first Trump administration remain in place. Asked what would happen at the end of 90 days to avoid tariffs ratcheting back up, Bessent indicated there’s a chance to extend the truce further. “Just like with all our other trading partners, as long as there is good faith effort, engagement, and constructive dialog, then we will keep moving forward,” he said.
In a research note, Maeva Cousin of Bloomberg Economics said the tariff reductions “substantially lower the U.S. average tariff shock on China,” though the remaining import taxes remain high and could still cut U.S. imports from China by about 70 percent in the medium term.
China announced that it will suspend or cancel the non-tariff countermeasures it has imposed on the United States since April 2. That’s an apparent reference to China’s addition on April 4 of seven rare earths to its export-control list. Securing the removal of those restrictions was a priority for Washington as a range of industries faced disruption. China has always handled relations with the U.S. based on the principles of mutual respect, the official Xinhua News Agency reported, citing a white paper on national security. China is committed to the stable development of relations with the U.S., it said, and imposing pressure and threats is not the right way to deal with China.
“The agreement, which significantly lowers tariffs without any concessions, is likely to be viewed as a particular victory for China,” Lynn Song, ING’s chief economist for greater China, wrote in a research note.
Around the same time the tariff reductions were unveiled, China released a white paper on national security that vowed to add more tools to Beijing’s retaliation toolkit and improve mechanisms for countering sanctions and so-called long-arm jurisdiction.
Trade Slump Spurs Negotiations
The trade war de-escalation comes after recent data showed a slump in trade across the Pacific Ocean. The U.S. and China had earlier reported “substantial progress” in talks, which buoyed markets and helped Chinese stocks recoup their losses since Trump’s “Liberation Day” announcement of tariffs on April 2.
Ryan Petersen, the founder and CEO of digital logistics platform Flexport Inc., posted a note on X indicating he expects a race to transport goods across the Pacific, given the tariff reprieve. “Get ready for a shipping boom,” he wrote without elaborating.
Trade Representative Jamieson Greer said the United States wants to have more balanced trade with China and “our Chinese counterparts clearly came to deal this week.” Before the talks began in Switzerland, Trump posted on Truth Social that an 80 percent tariff on China “seems right” but left it up to his Treasury chief to decide. Bessent said Monday that the president had viewed that level as “a number that did not cause an embargo.”
Asked on Monday how the U.S. team ultimately landed on a much lower number in the talks, Greer said: “Everything is a negotiation.” The U.S. president offers “direction and advice on how to proceed, and we ended up at a result that is very good for the United States—very good for China as well,” Greer told reporters. He listed measures that were left in place as part of the truce, including the 10 percent global baseline tariff that was applied to all U.S. trading partners, as well as China-specific tariffs Trump imposed during his first term that “have been effective in reducing the U.S. bilateral trade deficit with China.
“That leaves us in a very good position, all in, with respect to measures on Chinese imports,” Greer added. “But, more importantly, leaves us on a constructive path forward to have a positive conversation with the Chinese on how to rebalance.”
While markets have cheered recent reports of progress, history suggests that reaching a detailed agreement could take a long time, if such an agreement is possible at all. In 2018, the two sides also agreed to put their dispute “on hold” after a round of negotiations, but the United States soon backed away from that deal, leading to more than 18 months of further tariffs and talks before the signing of the “Phase One” trade deal in January 2020. In the end, China failed to live up to the purchase agreement in that deal, and the U.S. trade deficit with China jumped during the pandemic, setting up the current trade war.
Greer made clear that discussions about the phase one deal did not factor into this weekend’s talks, and it remains unclear whether the Trump team will revisit that agreement or enforce it. Bessent said Monday that that deal had offered a template and that Beijing “neglected” its obligations only under the Biden administration. But since the deal was done, “the world has changed, products have changed, product mix has changed—so I think everything is on the table.” Greer said earlier that “the talks were very much focused on how do we get the tariff levels to something that is not an embargo, but still allows the United States to pursue its goal of trade deficit reduction,” he said.
At one point in the weekend talks, Bessent made his point by reaching into the bowl of sugar in front of him, putting a small amount in the palm of his hand, and telling his Chinese counterparts, “This would kill everyone in this room,” according to a person familiar with the episode. He then proceeded to take out a bit more sugar and said: “This would kill everyone in Geneva,” and more to signal an amount that would kill everyone in Switzerland—shocking Chinese negotiators with his frankness, the person added.
Xu Datong, China’s vice minister of public security, was among those in the room, the person said.
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