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US and China agree to slash tariffs as trade war eases [1]
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Date: 2025-06
Markets rise as US and China agree to slash tariffs
12 May 2025 Share Save Nick Edser, Jonathan Josephs & Lucy Hooker Business reporters, BBC News Share Save
Watch the moment US Treasury Secretary Scott Bessent announces the tariff reduction
Share markets jumped on Monday after President Trump said weekend talks had resulted in a "total reset" in trade terms between the US and China, a move which goes some way to defuse the high stakes stand-off between the two countries. The talks in Switzerland resulted in significant cuts to the tit-for-tat tariffs that had been stacked up since January on both sides. The US will lower those tariffs from 145% to 30%, while China's retaliatory tariffs on US goods will drop to 10% from 125%. President Trump told reporters, that, as some of the levies have been suspended rather than cancelled altogether, they might rise again in three months time, if no further progress was made.
However, he said he did not expect them to return to the previous 145% peak. "We're not looking to hurt China," Trump said after the agreement was announced, adding that China was "being hurt very badly". "They were closing up factories. They were having a lot of unrest, and they were very happy to be able to do something with us." He said he expected to speak to Chinese President Xi Jinping "maybe at the end of the week". What does the US-China tariff deal mean? Investors welcomed the de-escalation. The S&P 500 index jumped more than 3.2% after the announcement, while the Dow climbed 2.8% and the Nasdaq had surged 4.3% by the end of the day. The gains left the indexes roughly where they started the year, fully recovered from the losses they sustained in the aftermath of the 2 April tariffs announcement, dubbed "Liberation Day" by the Trump administration. Framed as a campaign to give Americans a fairer deal from international trade, the US announced a universal baseline tariff on all imports to the US. Around 60 trading partners, which the White House described as the "worst offenders", were subjected to higher rates than others, and this included China. Beijing retaliated with tariffs of its own, which led to levies being ratcheted up on both sides, sending shares sharply lower.
Under the new agreement, the US is reducing the "reciprocal" tariff on Chinese goods that it announced on "Liberation day" to 10%. But it said the higher levy rate was being suspended for 90 days, rather than removed permanently. The US is also keeping in place the extra 20% tariff aimed at putting pressure on Beijing to do more to curb the illegal trade in fentanyl, a powerful opioid drug. For its part, China is also reducing to 10% the retaliation tariffs they put in place in response to Trump's "Liberation day" announcement, again suspended for three months. China has also agreed to "suspend or remove" all non-tariff measures against the US. Pre-existing tariffs, including higher sector-specific tariffs on things like steel and cars, remain in place. However, additional retaliatory tariffs, that were added subsequently, have been cancelled altogether on both sides. The retreat comes as the first impacts from the tariff-war were beginning to show, with US ports reporting a sharp drop in the number of ships scheduled to arrive from China. Factory output has slowed in China, and there are reports of firms laying off workers, as US orders dried up. China's commerce ministry said the agreement was an important step to "resolve differences" which would help to "deepen co-operation". Faisal Islam: US and China step back from brink
Laura Bicker: China has come to the table - but this fight is far from over Tat Kei, a Chinese exporter of personal care appliances to the US, whose factory employs 200 people in Shenzhen, welcomed the announcement, but said he still feared what else might be to come. "President Trump is going to be here for the next three-and-a-half years. I don't think this is going to be the end of it... not by a long shot," he told the BBC. Elaine Li, head of Greater China at Atlas Ways, which offers services for Chinese enterprises' global development, also said she believed many Chinese firms would treat the reprieve as temporary. "For businesses, the best they can do is build a moat around their company before the next round of tariffs arrives," she said.
Getty Images
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[1] Url:
https://www.bbc.com/news/articles/czx0ry7kdk5o
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