Six Q&As about today's tariff agreement between the U.S. and China
Tomorrow we will be sharing our Quarterly Market Report and commentary with you regarding the first quarter of 2025. However, we felt that given today’s developments it would be helpful to share a separate email to aid in understanding what transpired with today’s tariff agreement.
Today’s news regarding the U.S.-China temporary reduction in tariffs for the next 90 days is about to dominate the news cycle – and it will include a fair share of opinion, interpretation and hyperbole. Before opinions and commentary begin to reframe this news, it is helpful to be grounded in the facts – as we know them today – about the tariff deal.
Based on reporting from the Wall Street Journal and other outlets, here are six things worthing knowing at this time, with the understanding that this is a developing story.
What has the U.S. agreed to do?
The U.S. will lower tariffs of 145% on Chinese goods, imposed since President Trump took office, to 30%. Within that framework, Washington will cut its 125% “reciprocal” tariff on Chinese goods to 10%. A 20% tariff tied to the fentanyl crisis will remain. Levies that predate Trump's second term will also continue.
What has China agreed to do?
China will cut its retaliatory levy on U.S. goods to 10% from 125%. It has also agreed to suspend or cancel retaliatory, nontariff measures. That could potentially include export restrictions on critical minerals used in batteries and other high-tech applications.
How permanent is this agreement?
It’s temporary. The rollbacks will last for 90 days while the two sides continue negotiations. Both sides will take these actions by Wednesday, May 14.
What isn’t included?
Speaking in Geneva on Monday, Treasury Secretary Scott Bessent said the agreement doesn’t include any sector-specific tariffs that have been put across all trading partners. He also said there were no discussions on currencies. Bessent said he also expects both countries might discuss possible agreements by Beijing to purchase U.S. goods, which would narrow the trade imbalance between the countries.
How do tariffs compare to before President Trump took office?
Even with Monday’s reduction, tariffs on China remain higher than they were at the start of the year. Washington’s effective tariff rate on China stood at 11% before Trump took office in January, according to economists at Citi and Macquarie. That means overall U.S. tariffs on China now stand at roughly 39%, the Citi team estimates, once some exemptions are factored in.
What are U.S. officials saying about the agreement?
Bessent said the consensus over the weekend was that “neither side wants a decoupling.” Trade Representative Jamieson Greer said the escalating trade war had amounted to the equivalent of an embargo, “which of course was not a sustainable practice for either side.”