U.S. and China Agree to 90-Day Tariff Pause to De-Escalate Trade War

 In a significant step toward averting a full-scale trade war, the United States and China have agreed to a 90-day pause on new tariffs, with reciprocal duties set to drop sharply starting May 12, 2025. The breakthrough, announced following high-level talks between U.S. President Donald Trump and Chinese President Xi Jinping, has bolstered global markets and offered hope for renewed economic cooperation between the world’s two largest economies.

The agreement follows months of escalating trade tensions, with the U.S. imposing 25% tariffs on $200 billion of Chinese goods in January 2025, prompting China to retaliate with levies on U.S. agricultural and industrial products. The tit-for-tat measures disrupted supply chains, increased consumer prices, and threatened global growth, with the International Monetary Fund estimating a 0.8% GDP loss for both nations by 2026. The 90-day truce, finalized during a virtual summit on May 10, commits both sides to reduce existing tariffs by 50% and halt new ones, creating a window for negotiations on issues like intellectual property, market access, and technology transfers.

Trump hailed the deal as a “win for American workers,” emphasizing that China has agreed to increase purchases of U.S. energy, soybeans, and manufactured goods. The White House projects that the tariff reductions could save U.S. consumers $10 billion annually, particularly in electronics and apparel. China, meanwhile, secures relief for its exporters, who faced declining demand due to U.S. levies. The agreement also includes a commitment to address forced technology transfers, a longstanding U.S. grievance, with China pledging to strengthen intellectual property protections.

Global markets reacted positively, with the Dow Jones surging 600 points and Asian indices, including China’s CSI 300, gaining 3% on May 12. However, analysts caution that the truce is temporary, with deep-rooted issues like China’s state subsidies and U.S. export controls on semiconductors unresolved. The talks, set to continue in Beijing in July 2025, will test both nations’ willingness to compromise. Trump has maintained that he will not fully lift tariffs until China meets all U.S. demands, while Xi has stressed the need for mutual respect in trade relations.

The agreement has broader implications, easing pressures on allies like the European Union, which faced potential U.S. tariffs, and stabilizing supply chains for critical goods like semiconductors and pharmaceuticals. However, domestic challenges persist, with U.S. farmers and manufacturers seeking long-term assurances, and Chinese firms wary of policy reversals. As the 90-day period unfolds, the world watches closely to see if this détente can pave the way for a lasting resolution to one of the most consequential trade disputes in decades.