USA and China: tariffs fall – a new beginning for trade!

USA and China: tariffs fall – a new beginning for trade!

On May 14, 2025, the United States and China reached an agreement to mutually reduce tariffs for a period of 90 days. This agreement aims to advance negotiations on “structural issues” between the world’s two largest economies. Markets responded positively to the withdrawal of tariffs previously increased to 145 percent, resulting in the effective tariff rate being reduced to an estimated 40 percent.

US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng led the negotiations in Geneva. Under the agreement, U.S. tariffs on Chinese goods fell from 30 percent and China reduced tariffs on U.S. imports from 125 percent to 10 percent. Bessent expressed the desire for more balanced trade and made it clear that decoupling was not desired. The Chinese trade minister expressed optimism about the continuation of the consultations.

Market reactions and political announcements

The agreement led to a 3.3 percent rise in the S&P 500. Despite these positive developments, Trump warned that tariffs may be reimposed, but not at as high a rate as before. Tariffs on steel, aluminum and cars remain in place, while new tariffs on pharmaceutical products have been announced.

A former editor of the Global Times called the deal a “big victory for China.” International economic experts suggest that the US will be forced to step back from its aggressive tariff policies. The development follows a secret meeting between Bessent and China's finance minister in April that led to a sell-off on Wall Street and the U.S. Treasury market with announcements of massive tariff hikes.

Conflicts over fentanyl and blame

Parallel to the economic negotiations, tensions surrounding the opioid epidemic in the United States continue. China has made it clear that it is not responsible for this crisis. A Chinese Foreign Ministry spokesman, Lin Jian, advised the US that “fentanyl is the problem of the United States, not China.” China criticizes the US's fentanyl tariffs as inappropriate and damaging to bilateral drug control cooperation.

Lin called on the US to stop blaming China and cooperate in respectful and equal dialogue. Washington has long accused China of turning a blind eye to fentanyl trafficking activities, something the Chinese side vehemently denies.

The current geopolitical situation underscores the fundamental problems in the conflict, where the focus is on US dominance on the one hand and China's economic rise on the other. In the discussion about military methods to maintain US dominance, it becomes clear that economic measures cannot be the only solution.

Overall, recent developments show a complex balance in the relationship between the two nations, with both economic cooperation and ongoing conflicts on the agenda. While both sides welcome the agreement, it remains to be seen how they will respond to the existing challenges.

For more information about the events and their impact, please visit WSWS and Channel News Asia.