In a move that has sent ripples of relief through global markets, the United States and China have forged an agreement to temporarily reduce reciprocal tariffs. This decision comes as the world’s two largest economies seek to de-escalate a trade war that has fueled recession fears and rattled financial stability.

The Geneva Breakthrough

Following discussions with Chinese officials in Geneva, U.S. Treasury Secretary Scott Bessent announced a 90-day pause on further tariff measures. More significantly, existing tariffs will be reduced by over 100 percentage points, settling at a 10% baseline rate.

Bessent emphasized the mutual benefits of the agreement,stating on Monday,Both countries represented their national interest very well. We both have an interest in balanced trade, the U.S. will continue moving towards that.

Market Reaction and economic Impact

The immediate aftermath of the announcement saw the dollar strengthen against major currencies, and financial markets experienced a notable upswing. This positive reaction reflects a collective sigh of relief, mitigating concerns about an economic downturn that had been exacerbated by previous tariff escalations.

The agreement aims to reverse the effects of heightened tariffs, which, according to Bessent, were the equivalent of an embargo. He further clarified,Neither side wants that.We do want trade.

Background: A Tariff Blitz

The Geneva meetings marked the first in-person discussions between senior U.S. and Chinese economic officials since the current governance initiated a global tariff strategy, with particularly heavy duties imposed on China.

Since January, tariffs paid by U.S. importers on goods from China had surged to 145%, compounding previous duties. China responded by implementing export restrictions on rare earth elements and raising tariffs on U.S. goods to 125%.

Voices from the Ground

Experts are cautiously optimistic about the potential impact of the tariff reduction.

This is better than I expected. I thought tariffs would be cut to somewhere around 50%.
Zhiwei Zhang, chief economist at Pinpoint Asset Management in Hong Kong

Zhang added, Obviously, this is very positive news for economies in both countries and for the global economy, and makes investors much less concerned about the damage to global supply chains in the short term.

Key Outcomes and Future Dialog

Following the talks, U.S. officials highlighted a “deal” to reduce the U.S. trade deficit, while Chinese officials emphasized an “critically important consensus” and the establishment of a new economic dialogue forum.

The U.S. president offered a positive reading of the talks, stating that the two sides had negotiated a total reset… in a pleasant, but constructive, manner.

Discussions also touched on the issue of fentanyl entering the United States, with U.S. Trade Representative Jamieson Greer describing the conversations as very constructive though on a separate track.

Chinese Vice Premier he Lifeng acknowledged ample progress following the talks.