Truce in the customs war: USA and China breathe a sigh of relief!

Truce in the customs war: USA and China breathe a sigh of relief!

On May 13, 2025, a crucial step in the US-China trade conflict was announced: a 90-day ceasefire in the tariff war was agreed between the two countries. This was done by Trading meeting reports, which also highlights the significant changes in punitive tariffs. The US is cutting its tariffs on Chinese imports from 145% to 30%, while China is reducing duties on US imports from 125% to 10%. These measures are intended to lead to a recovery in bilateral trade relations in the short term.

The agreement also includes China's commitment to lift export restrictions on critical raw materials. The reaction of the financial markets to these developments was consistently positive; stock prices rose worldwide. Notably, the S&P 500 closed at its highest level since early March and the Nasdaq Composite reached its highest level since late February. The US dollar also reacted positively and reached a one-month high of 101.67.

Market developments and economic effects

In addition to rising stock prices, sentiment indicators in the real economy are showing relief. For example, Australian consumer sentiment rose 2.2%. UK retail sales also saw positive news, rising 7.0% year-on-year in April. This could indicate growing confidence in the economic environment.

Despite these positive developments, the fundamental conflicts between the USA and China remain unresolved. Key issues such as the trade deficit, which was around $375 billion in 2017, and the fentanyl crisis remain contentious. Companies and market players are seeking greater clarity on how negotiations will progress as uncertainties remain over a final agreement.

Background to the trade conflict

The disputes between the USA and China have been ongoing since March 2018 and are characterized by mutual punitive tariffs. The US government originally imposed tariffs on imports from China worth around $370 billion. China responded with tariffs on US imports, which further strained trade relations. In January 2020, the Phase One Trade Agreement was signed, which committed China to purchase $200 billion worth of US products in two years.

But implementation of this agreement was slow. Critics described the agreement as “managed trade,” raising concerns about a possible violation of WTO principles. Planned increases in U.S. exports to China were only partially achieved, and the trade deficit remained a pressing problem for the U.S. economy.

The changes in trading strategy raise questions, particularly about the impact on the U.S. economy. Tariff policies and trade conflicts resulted in mixed effects for third countries and negatively impacted growth and employment in the United States. It remains to be seen how the next three months will pan out and whether the measures now taken will lead to a lasting solution to the conflict.