US, China take a step back from sky-high tariffs

GENEVA — U.S. and Chinese officials said Monday they had reached a deal to roll back most of their recent tariffs and call a 90-day truce in their trade war to allow for more talks on resolving their trade disputes. Stock markets rose sharply as the globe's two major economic powers took a step back from a clash that has unsettled the global economy. Economists warned that tariffs still remained higher than before and that the outcome of future talks was uncertain. U.S. Trade Representative Jamieson Greer said the U.S. agreed to drop its 145% tariff rate on Chinese goods by 115 percentage points to 30%, while China agreed to lower its rate on U.S. goods by the same amount to 10%. A deal averts a total blockade Greer and Treasury Secretary Scott Bessent announced the tariff reductions at a news conference in Geneva. The two officials struck a positive tone as they said the two sides had set up consultations to continue discussing their trade issues. Bessent said at the news briefing following two days of talks that the high tariff levels would have amounted to a complete blockage of each side's goods — an outcome neither side wants. "The consensus from both delegations this weekend is neither side wants a decoupling," Bessent said. "And what had occurred with these very high tariff ... was an embargo, the equivalent of an embargo. And neither side wants that. We do want trade." "We want more balanced trade," he said. "And I think that both sides are committed to achieving that." The delegations, escorted around town and guarded by scores of Swiss police, met for at least a dozen hours on both days of the weekend at a sunbaked 17th-century villa that serves as the official residence of the Swiss ambassador to the United Nations in Geneva. At times, the delegation leaders broke away from their staffs and settled into sofas on the villa's patios overlooking Lake Geneva, helping deepen personal ties in the effort to reach a much-sought deal. Finally, a deal China's Commerce Ministry said the two sides agreed to cancel 91% in tariffs on each other's goods and suspend another 24% in tariffs for 90 days, bringing the total reduction to 115 percentage points. The ministry called the agreement an important step for the resolution of the two countries' differences and said it lays the foundation for further cooperation. "This initiative aligns with the expectations of producers and consumers in both countries and serves the interests of both nations as well as the common interests of the world," a ministry statement said. China hopes the United States will stop "the erroneous practice of unilateral tariff hikes" and work with China to safeguard the development of their economic and trade relations, injecting more certainty and stability into the global economy, the ministry said. The joint statement issued by the two countries said China also agreed to suspend or remove other measures it has taken since April 2 in response to the U.S. tariffs. China has increased export controls on rare earths, including some critical to the defense industry, and added more American companies to its export control and unreliable entity lists, restricting their business with and in China. Markets rally as two sides de-escalate The full impact on the complicated tariffs and other trade penalties enacted by Washington and Beijing remains unclear. And much depends on whether they will find ways to bridge longstanding differences during the 90-day suspension. Bessent said in an interview with CNBC that U.S. and Chinese officials will meet again in a few weeks. But investors rejoiced as trade envoys from the world's two biggest economies blinked, finding ways to pull back from potentially massive disruptions to world trade and their own markets. Futures for the S&P 500 jumped 2.6% and the Dow Jones Industrial Average was up 2%. Oil prices surged more than $1.60 a barrel and the dollar gained against the euro and the Japanese yen. "This is a substantial de-escalation," said Mark Williams, chief Asia economist at Capital Economics. But he warned "there is no guarantee that the 90-day truce will give way to a lasting ceasefire." Dani Rodrik, an economist at Harvard University, said that the two countries had stepped back "from a needless trade war'' but that U.S. tariffs on China remain high at 30% "and will mainly hurt U.S. consumers.'' U.S. President Donald Trump "has obtained absolutely nothing from China for all the chaos he generated. Zilch,'' Rodrik wrote, posting on Bluesky. Trump last month raised U.S. tariffs on China to a combined 145%, and China retaliated by hitting American imports with a 125% levy. Tariffs that high essentially amount to the two countries boycotting each other's products, disrupting trade that last year topped $660 billion. The announcement by the U.S. and China sent shares surging, with U.S. futures jumping more than 2%. Hong Kong's Hang Seng index surged nearly 3% and benchmarks in Germany and France were both up 0.7% The Trump administration has imposed tariffs on countries worldwide, but its fight with China has been the most intense. Trump's import taxes on goods from China include a 20% charge imposed because Trump says Beijing has not done enough to stop trafficking in the precursor chemicals used to make the synthetic opioid fentanyl. "The drop from sky-high to merely high tariffs, along with the uncertainty about the path of future tariffs, will still serve as a constraint on trade and investment flows between the two economies," said Eswar Prasad, professor of trade policy at Cornell University. "Nevertheless, it is a positive omen for the world economy that U.S. tariffs might eventually end up as significant trade barriers but not unsurmountable walls that block off international trade altogether,'' he said. ___ McHugh contributed from Frankfurt, Germany; Kurtenbach from Mito, Japan; and Moritsugu from Beijing. Associated Press writer Paul Wiseman in Washington contributed to this report.