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China and US Release Joint Statement on Tariff Negotiations

Relief Is on the Way for Affected Markets

In a joint statement released Monday, May 12, the United States and China announced the easing of key tariffs and pledged to continue talks. The delegations from the two countries, led by China's Vice Premier He Lifeng and the United States' Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer, met in Geneva, Switzerland, May 10 and 11.

Future talks can be held in the US, China or a third country, according to the statement.

What Does It Mean?

The topline takeaway from the statement is that both the US and China agreed to a 90-day pause on most of the tariffs they imposed (source). According to the statement, the US will immediately cut tariffs on China to 30% and China will cut its tariffs on the US to 10%. That is not the final word however, as this arrangement is for 90 days. The statement says talks will continue, promising to further iron out trade relations between the two countries and reach a long-term agreement that is a win-win for both parties.

The statement goes to great lengths to emphasize the importance of the trading relationship between the US and China and its importance to the global economy.

China had retailiated against the United States' initial 50% tariffs with 125% tariffs of their own, which the Trump administration answered with 145% tariffs. In an interview with NBC News, Trump acknowledged that he had been "very tough with China," essentially cutting off trade between the world's top two economies, but said Beijing now wanted to reach an agreement.

The US-China trade summit over the weekend of May 10 and 11 was somewhat of a surprise since as late as the previous week China was refusing to come to the table.

"[The Chinese] want to make a deal. They want to make a deal very badly. We'll see how that all turns out, but it's got to be a fair deal," the president said.

Many Gift & Home industry vendors have experienced being knocked-off by Chinese factories, which is just one indication of China's willingness to take advantage of the United States. Bessent related that the first Trump administration established a trade agreement with China in Jan. 2020, but the Chinese trade reps at the meeting over the weekend said when Biden was elected the Chinese felt they could ignore the agreement (source).

What About the Rest of the World?

According to US Treasury Secretary Scott Bessent earlier, the administration is negotiating with more than 70 countries, but has prioritized 17 major trading partners with which the US has large trade deficits (source).

On April 2, the Trump Administration put tariffs of 10% generally on most countries, with a few getting much higher, however most of those tariffs were paused for 90 days as negotiations move forward.

The United Kingdom was the first to complete a deal on May 8. Some are not satisfied with the deal, but Prime Minister Keir Starmer responded, "Thousands of jobs have been saved" by the new agreement. “The question you should be asking is: ‘is it better than it was yesterday’?” (source).

India, South Korea and Japan are also near to agreements with the US. According to Bessent, the majority of the US trade deficit can be blamed on about 15 countries. "I would be surprised if we don't have more than 80 or 90% of those wrapped by the end of the year, and that may be much sooner," Bessent said. "I would think that perhaps as early as this week we will be announcing trade deals with some of our largest trading partners." He said this before the US-China joint statement.

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