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Markets Rise As US and China Agree to Slash Tariffs

The moment Scott Bessent Secretary of the Treasury. Announces the tariff reduction. (Photo: Screenshot BBC)

By Nick Edser & Jonathan Josephs

May 12, 2025
6:01 pm
Los Angeles, CA

Share markets jumped on Monday after President Trump said weekend talks had resulted in a “total reset” in trade terms between the US and China, a move which goes some way to defuse the high stakes stand-off between the two countries. The talks in Switzerland resulted in significant cuts to the tit-for-tat tariffs that had been stacked up over the last month on both sides. US tariffs on Chinese imports will fall to 30% from 145%, while China’s tariffs on US goods will drop to 10% from 125%. While some of the levies have been suspended rather than cancelled altogether, President Trump told reporters he did not expect US tariffs on Chinese goods to return to the 145% peak. “We’re not looking to hurt China,” Trump said after the

The talks in Switzerland resulted in significant cuts to the tit-for-tat tariffs that had been stacked up over the last month on both sides.

US tariffs on Chinese imports will fall to 30% from 145%, while China’s tariffs on US goods will drop to 10% from 125%.

While some of the levies have been suspended rather than cancelled altogether, President Trump told reporters he did not expect US tariffs on Chinese goods to return to the 145% peak.

“We’re not looking to hurt China,” Trump said after the agreement was announced, adding that China was “being hurt very badly”.

“They were closing up factories. They were having a lot of unrest, and they were very happy to be able to do something with us.”

He said he expected to speak to Chinese President Xi Jinping “maybe at the end of the week”.

Investors welcomed the de-escalation, with the Dow Jones and S&P indexes rising more than 2.5% when trading began on Monday, and the tech-heavy Nasdaq up 3.3%.

Share indexes have for some days been trading above their level on 2 April, dubbed “Liberation Day” by the Trump administration.

Framed as a campaign to give Americans a fairer deal from international trade, the US announced a universal baseline tariff on all imports to the US.

Around 60 trading partners, which the White House described as the “worst offenders”, were subjected to higher rates than others, and this included China.

Beijing retaliated with tariffs of its own, which led to levies being ratcheted up on both sides, sending shares sharply lower.

Under the new agreement, the US and China have both suspended all but 10% of their Liberation Day tariffs for 90 days and cancelled altogether the additional retaliatory tariffs.

China has also agreed to “suspend or remove” all non-tariff measures against the US.

However, levies remain higher on the US side, as they still include an extra 20% component aimed at putting pressure on Beijing to do more to curb the illegal trade in fentanyl, a powerful opioid drug.

The huge tariffs imposed had raised the prospect of trade between the two countries slumping, with US ports reporting a sharp drop in the number of ships scheduled to arrive from China.

Meanwhile Beijing has become increasingly concerned about the impact the tariffs could have on its economy. Factory output has already slowed and there are reports some firms were having to lay off workers as production lines of goods bound for the US began to grind to a halt.

Announcing the agreement, Bessent said: “The consensus from both delegations this weekend is neither side wants a decoupling.

“What had occurred with these very high tariffs was the equivalent of an embargo, and neither side wants that.

“We do want trade, we want more balanced trade, and I think that both sides are committed to achieving that.”

China’s commerce ministry said the agreement reached with the US was an important step to “resolve differences” and “lay the foundation to bridge differences and deepen co-operation”.

Neil Shearing, group chief economist at Capital Economics, said the agreement represented a “significant de-escalation” of the trade war.

“We’ve come from a place where tariffs imposed… were so high as to almost preclude trade in the long run between the world’s two largest economies,” he told the BBC.

inside Chinese clock factory, assembly line, factory visit on MAY 7, 2010 in Shenzhen. (Photo:© Bartlomiej Magierowski| Dreamstime.com)

However, he added, while trade will now continue, “it will happen at a higher price and that higher price will be borne by US consumers and US businesses”.

European stocks also rose on Monday, and earlier Hong Kong’s benchmark Hang Seng Index had ended the day up 3%.

The deal has boosted shares in shipping companies, with Denmark’s Maersk up more than 12% and Germany’s Hapag-Lloyd jumping 14%.

Maersk told the BBC the US-China agreement was “a step in the right direction”.

“We hope it can lay the foundation for the parties to also reach a permanent deal that can create the long-term predictability our customers need.”

However, the gold price – which has benefited from its safe-haven status in recent weeks given the disruption caused by the tariffs – fell 3.1% to $3,223.57 an ounce.

In a joint statement, both countries said they would establish “a mechanism to continue discussions about economic and trade relations”, led by Scott Bessent and China’s Vice Premier He Lifeng.

It added that both countries believe that “continued discussions have the potential to address the concerns of each side in their economic and trade relationship”.

President Trump has long been unhappy with the fact that the US buys substantially more goods from China than it sells it.

Other concerns include a lack of protection for the intellectual property rights of American companies in China including the forced transfer of technology.

There’s also unhappiness about alleged Chinese government subsidies that give their companies an unfair advantage – something Beijing says Washington also does.

When President Trump first announced the tariffs, he argued they would boost American manufacturing and protect jobs.

But many economists argued they would hit growth in the global economy, and make many products more expensive for US consumers.

Last month, the International Monetary Fund cut its growth forecast for the global economy for this year to 2.8% from 3.3%, arguing that the uncertainty caused by the tariffs would hit supply chains and lead to firm’s either pausing or cutting investment.

The UK and US reached a deal last week over tariffs on some goods traded between the countries.

The blanket 10% tariffs on imports entering the US from countries around the world still applies to most UK goods, but the deal reduced or removed tariffs on some UK exports, including cars, steel and aluminium.

Source: BBC