Key Points:
- US cuts tariffs on Chinese imports from 145% to 30%, China lowers duties from 125% to 10%.
- 90-day tariff suspension agreed to stabilize markets and resume trade talks.
- Geneva talks mark first high-level dialogue since Trump’s political resurgence.
- $600 billion bilateral trade standstill eased, reducing stagflation risks.
- New US-China economic forum launched to address supply chains, tech, and steel.
- Global stocks surge as fears of recession and trade decoupling fade.
US-China Geneva Talks: A Turning Point in Trade Relations
The United States and China have struck a pivotal deal to slash tariffs and revive stalled economic cooperation during high-level talks in Geneva, Switzerland. This marks the first major diplomatic breakthrough since former President Donald Trump’s return to power reignited fears of a prolonged trade war. The agreement aims to defrost $600 billion in frozen bilateral trade, ease global stagflation concerns, and rebuild trust between the world’s two largest economies.
US Treasury Secretary Scott Bessent hailed the agreement as a
“Neither side wants economic decoupling. We aim for balanced trade and open communication.”
Why This Deal Matters
1. Halting the Trade War Spiral
The Trump administration’s April 2024 tariff hikes had pushed US-China relations to a breaking point. Over $600 billion in two-way trade spanning electronics, machinery, and consumer goods came to a standstill. Analysts warned of stagflation (stagnant growth + inflation) as supply chains faltered and prices soared. The Geneva deal temporarily pauses this cycle, offering breathing room for businesses and policymakers.
2. Market Relief
Global markets rallied immediately after the announcement:
- Hong Kong’s Hang Seng Index jumped 3.2%.
- Wall Street’s S&P 500 climbed 1.8%, led by tech and manufacturing stocks.
- The US Dollar Index rose 0.7%, reflecting renewed investor confidence.
Zhiwei Zhang, Chief Economist at Pinpoint Asset Management, noted,
“These cuts go beyond expectations. Markets are pricing in reduced recession risks.”
3. Strategic Rebalancing
The US clarified that sector-specific tariffs (e.g., 50% duties on Chinese EVS) remain untouched, prioritising sectors critical to national security. Meanwhile, China agreed to suspend non-tariff countermeasures, such as export restrictions on rare-earth minerals.
Challenges Ahead
While the deal signals progress, major hurdles persist:
- Negotiation Deadlines: The 90-day window pressures both sides to resolve deep-rooted issues like intellectual property theft and state subsidies.
- Political Pressures: Trump’s “America First” base may oppose concessions to China, while Beijing faces domestic pressure to protect its industries.
- Supply Chain Realignment: The US seeks to reduce reliance on Chinese manufacturing, but reshoring critical industries like semiconductors could take years.
Global Reactions and Future Steps
The Geneva talks have revived hopes for multilateral cooperation:
- EU officials praised the détente, urging similar progress on transatlantic trade disputes.
- ASEAN nations welcomed reduced disruptions to regional supply chains.
- The IMF revised its 2024 global growth forecast upward by 0.4%, citing eased trade tensions.
Looking ahead, the US-China economic forum will meet quarterly to address disputes. “This isn’t the end, but a new beginning,” said Chinese lead negotiator Liu He.
