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The White House announced the tariff-lowering agreement on Monday, May 12. Both countries will reduce their tariffs to a baseline 10% rate, with the US continuing to impose its 20% tariff on China related to fentanyl.
The drastic reduction comes after President Donald Trump dramatically raised tariffs on Chinese imports to a combined 145%, causing Beijing to retaliate with a 125% tariff on US goods. The agreement also pauses additional tariff hikes for 90 days.
American and Chinese trade negotiators agreed to the de-escalation measures after weekend discussions in Geneva.
"We had very productive talks and I believe that the venue, here in Lake Geneva, added great equanimity to what was a very positive process," Treasury Secretary Scott Bessent said at a news conference, CNBC reported.
Economists at the major German investment firm Commerzbank noted that the US and China's tariffs on each other will still be much higher than before Trump returned to office, CNN reported.
The announcement came just days after Trump had unveiled the outline of the first trade deal since his sweeping "liberation day" tariffs shook the US economy. The US and the United Kingdom announced an agreement that the White House claims will give American businesses $5 billion in new market access in the UK.
The China talks also followed many troubling indicators for the US economy under Trump. Most notably, the country's gross domestic product declined by 0.3% in the first quarter of 2025, the first retraction in three years as companies and consumers raced to buy imports ahead of Trump's trade wars.
According to the White House, the 30% combined tariff on China is a "fair" level that promotes domestic production and "levels the playing field." The countries have also agreed to "take aggressive actions to stem the flow of fentanyl."
Trade experts called the tariff cut larger than expected.
"This reflects both sides recognizing the economic reality that tariffs will hit global growth and negotiation is a better option going forward," said Tai Hui, Asia-Pacific chief market strategist at J.P. Morgan Asset Management.
Economists warned that the three-month window may not be long enough for the US and China to reach a significant trade deal.
"This is a substantial de-escalation," Capital Economics chief Asia economist Mark Williams wrote in a research note. "However, the US still has much higher tariffs on China than on other countries and still appears to be trying to rally other countries to introduce restrictions of their own on trade with China. In these circumstances, there is no guarantee that the 90-day truce will give way to a lasting ceasefire."
The US continues to have 10% baseline tariffs on many countries, along with 25% duties on imports of aluminum, steel, cars, and light trucks. Canadian and Mexican imports not covered by the US-Mexico-Canada Agreement are also subject to 25% tariffs.
The White House also claimed the US had its largest trade deficit with any trading partner in 2024 at $295.4 billion.
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