Customs crisis overcome: historic trade agreement between the USA and China!

Customs crisis overcome: historic trade agreement between the USA and China!

After intensive 40 days of negotiations, the USA and China have reached an agreement regarding customs conflicts that have existed for some time. This is reported by the FAZ. US President Donald Trump previously imposed high tariffs on Chinese products, rising to 20% in direct response to China's lack of cooperation in the fight against fentanyl. Reciprocal tariffs of 34% were initially imposed on Chinese goods on April 2, 2018, increasing to 125% as tensions progressed. The new agreement calls for a reduction in tariffs to 10% each for a period of 90 days, with a difference of 20% remaining due to the specific fentanyl tariffs.

The negotiations were led by US Treasury Secretary Scott Bessent and China's Deputy Prime Minister He Lifeng in Geneva. Both sides have also raised the possibility of a purchasing agreement to reduce the bilateral trade deficit. China's chief negotiator in particular praised the atmosphere of the talks, while the WTO Director General hoped for positive developments for the future.

Economic impact of the agreement

The impact of the tariff dispute is already evident in current trade figures: China's exports to the US fell by 20% in April, and the number of ships delivering goods from China to the US fell by 30-50%. The significance of these developments is highlighted by the reporting of the daily news underlined, which predicts that global trade could fall by at least 0.2 percent in 2025. In the worst case, the decline could even be 1.5 percent. Without the tariff dispute, growth of around three percentage points more would have been possible.

The trade volume and economic performance in North America are particularly affected by the conflict. The gross domestic product (GDP) in North America could only increase by 0.4 percent instead of the actually expected 2 percent. In addition, exports in the region are expected to decline by 12.6 percent and imports by 9.6 percent. In contrast, Europe remains relatively less affected: economic growth of 1.2 percent is expected here for the current year, which represents a slight reduction compared to the originally forecast 1.4 percent.

Future prospects and trade flows

The WTO warns of the uncertainty in assessing the ultimate impact of the tariff conflict. There is a possibility that trade flows will be redirected to other regions. China's exports to regions outside North America could increase 4 to 9 percent, while U.S. imports from China are expected to fall significantly in areas such as textiles and electrical equipment. These developments could provide opportunities for developing countries to increase their exports to the US as international financial markets stabilize and the DAX reaches a record high.

In summary, the current tariff pause represents a crucial phase for global trade relations and both the EU and the US are required to reach a lasting agreement within the stipulated 90 day period.