U.S.-China Trade Tensions Ease with 90-Day Tariff Reduction Agreement

The United States and China have announced a 90-day tariff reduction agreement, temporarily easing tensions in the ongoing trade war that has rattled global markets. Under the agreement, the U.S. will lower tariffs on Chinese imports from 145% to 30%, while China will cut its blanket tariffs on American goods from 125% to 10%. The reductions will take effect on Wednesday May 14th and mark the first significant step towards de-escalating a trade conflict that has strained economic relations between the world’s two largest economies.

Key Details of the Agreement

• Tariff Reduction:

  • U.S. tariffs on Chinese goods will be reduced from 145% to 30%, while China will lower its tariffs on American goods from 125% to 10%.

• Exclusions Remain:

  • U.S. tariffs on Chinese imports related to fentanyl (20% IEEPA tariffs) and other targeted measures imposed during the trade conflict remain in place. Chinese tariffs on U.S. agricultural products also remain unchanged.

• Non-Tariff Measures:

  • China will suspend or cancel some non-tariff retaliatory actions, including export restrictions and blacklisting of U.S. companies, as part of the agreement.

• Negotiation Framework:

  • The agreement establishes a 90-day window for further negotiations, emphasizing continued communication, cooperation, and mutual respect.

Market Impact

• U.S. stock futures rose sharply, with Nasdaq futures up 3.7%, S&P 500 futures up 2.7%, and the Dow gaining more than 840 points.

• The U.S. Dollar Index climbed 1.1% to 101.46, reflecting increased investor confidence.

• Oil prices also surged, with Brent crude futures up 2.7% to $65.66 per barrel and U.S. West Texas Intermediate futures rising 2.9% to $62.81.

Outlook

While this agreement marks a significant thaw in U.S.-China trade relations, analysts remain cautious about the long-term outlook. As Mark Williams, Chief Asia Economist at Capital Economics, noted, “there is no guarantee that the 90-day truce will give way to a lasting ceasefire.” Investors and businesses should remain vigilant as both sides work through the complex issues underlying the trade conflict.

The countries' joint statement says that the U.S. and China will "establish a mechanism to continue discussions about economic and trade relations,” which will be led by China’s Vice Premier He Lifeng, alongside Bessent and U.S. Trade Representative Jamieson Greer. Senior U.S. officials said the countries also discussed fentanyl, and that negotiations may lead to “purchasing agreements” by China.

Other uncertainties remain as well, such as the Section 301 tariffs exemptions that are set to expire later this month. Constitution Partners is closely monitoring this story and will continue to provide updates as they become available. Please reach out to a member of our team with any questions you may have.