In a significant move to ease escalating trade tensions, the United States and China have agreed to a 90-day suspension of a substantial portion of their reciprocal tariffs. Announced on May 12, 2025, during talks in Geneva, this agreement marks a notable de-escalation in the ongoing trade dispute between the two economic giants.
Under the terms of the agreement, the U.S. will reduce tariffs on Chinese imports from 145% to 30%, while China will lower its tariffs on U.S. goods from 125% to 10%. This 115-percentage-point reduction on both sides is designed to provide temporary relief to industries and consumers affected by the trade war and to create a conducive environment for further negotiations.
The tariff reductions are broad, impacting a wide range of goods across various industries. Notably, sectors such as apparel, electronics, and retail, which are heavily reliant on U.S.-China trade, have experienced immediate benefits. Companies like Nike, Amazon, and Best Buy have seen stock gains ranging from 5% to over 11%, reflecting investor optimism.
Financial markets have responded positively to the announcement. The Dow Jones Industrial Average surged by 1,044 points (2.5%), the S&P 500 increased by 2.9%, and the Nasdaq rose by 4%. These gains indicate renewed investor confidence amid hopes for a more stable trade relationship between the U.S. and China.
Despite the market’s enthusiastic response, experts urge caution. Analysts highlight that while the tariff pause is a positive development, it is temporary and does not resolve underlying trade issues. Concerns remain about the potential re-escalation of tariffs after the 90-day period if substantive agreements are not reached. Additionally, some tariffs, such as the 20% levy related to fentanyl smuggling, remain in effect, indicating that not all trade barriers have been addressed.