U.S. and China Slash Tariffs After Geneva Talks: What It Means for Global Trade
On May 12, 2025, U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng announced a landmark agreement after two days of closed-door negotiations in Geneva, Switzerland. This is the most significant de-escalation in U.S.-China trade tensions since steep tariffs were introduced in early 2025.
Key Takeaways
- U.S. tariffs on Chinese goods have been reduced from a peak of 145% to 30%, including a 10% baseline tariff and a 20% tariff targeting fentanyl-related products.
- China will reduce its tariffs on U.S. goods from 125% to 10%.
- The changes take effect May 14, 2025, and are expected to remain in place for at least 90 days, subject to ongoing negotiation outcomes.
Economic Impact The reduction in tariffs is expected to:
- Ease pressure on U.S. importers and consumers
- Revive Chinese exports, which declined sharply under the previous tariffs
- Help address the U.S.’s $1.2 trillion trade deficit with China
Both countries suffered during the tariff war. The U.S. saw a 0.3% contraction in GDP during Q1 2025, while China’s exports to the U.S. declined and factory activity fell at its steepest rate in over a year.
Market Reactions The news boosted financial markets globally:
- U.S. futures (Dow, S&P 500, Nasdaq) surged
- The yuan strengthened
- Gold prices fell as investor confidence returned
What’s Next? The U.S. and China have agreed to launch a permanent trade dialogue mechanism, with talks to alternate between the two countries or neutral locations. The U.S. made clear that further tariff reductions would require reciprocal concessions.
Additional Measures
- The U.S. has imposed a new 25% tariff on imported cars and parts, with the UK receiving an exemption for 100,000 units annually.
- Both sides have retained special duties on sensitive goods such as fentanyl.
- The U.S. also enacted new port fees targeting Chinese shipping vessels.
Expert Commentary
- WTO and ICC leaders called the progress “significant,” while noting that tariffs above 20% continue to disrupt trade.
- Analysts expect continued dialogue to gradually lower tariffs, although rates are likely to remain above pre-2021 levels.
Stay informed as negotiations evolve. For more updates on how these changes may affect your supply chain, contact your Phoenix International representative.
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