This is a big deal for the United States and China. This agreement will join the two nations in lowering tariffs between them and represents a significant step toward reducing trade friction. Following weeks of negotiations in Geneva, Switzerland, representatives proclaimed a breakthrough agreement. The bilateral Agreement will be in effect for 90 days while the two countries work toward a broader trade accord.
The agreement signals a departure from the far-reaching tariffs imposed by President Trump, who had deemed April 2 “Liberation Day” during a Rose Garden ceremony. At the same time, he launched misguided tariffs that promised to raise prices and even risk throwing the U.S. into recession. To land the deal, new terms will cut U.S. tariffs on Chinese goods from a punishing 145% to 30%. In contrast, China has offered to reduce tariffs on U.S. goods from as high as 125% to 10%.
Jonathan Pingle, chief U.S. economist at UBS, is looking for a big snap back. For the U.S., that means average U.S. tariffs would be reduced from 24 percent to 14 percent. This change would dramatically benefit American consumers and businesses. They’ve been fighting against higher costs from previous bad trade policy.
Even the financial markets appeared pleased with the announcement. The Dow Jones Industrial Average rocketed up by 1,005 points, or 2.4%, and the tech-heavy Nasdaq gained an impressive 3.8%. The broad S&P 500 index equally wowed with a 2.7% spike. Retail behemoth Best Buy’s stock jumped more than 10% following the announcement. This spike is indicative of high investor exuberance over the prospects of likely massive economic gains from the tariff cuts.
Deutsche Bank expressed relief in light of the recent developments, stating, “Increasingly, it’s as if the last 6 weeks have been a bad dream and never actually happened.” This kind of sentiment is evidence of how much optimism has taken hold in the markets. Investors are looking for less tumultuous economic climate.
After President Trump first announced the U.S.-China deal, only a few days later he suspended reciprocal tariffs on a number of other countries. This decision was in addition to the current tariff settlement. This broader shift in trade policy may signal a new approach from the administration as it seeks to navigate complex international relationships.
Negotiations will likely stretch for the next three months. All eyes will be on each country to determine if they can produce a durable resolution that strengthens their respective economies and soothes global market fears.
