China and US Agree to 90-Day Tariff Cuts, Commit to Trade Talks

Deal marks major de-escalation from trade war that has put global economy on edge

- Aw Cheng Wei

China and the United States have both agreed to slash reciprocal tariffs on each other and to commit to trade talks, in a new development that has perked up markets and assuaged fears of a global economic slowdown.

For 90 days from May 14, the US will effectively cut tariffs on imports from China to 30 per cent from 145 per cent, while China will reduce tariffs on US goods to 10 per cent from 125 per cent.

Following the agreement, US President Donald Trump said he would likely speak to Chinese leader Xi Jinping later this week.

"We achieved a total reset with China after productive talks in Geneva," Mr Trump said during a news conference at the White House on May 12. "I'll speak to President Xi, maybe at the end of the week.

"They were very happy to be able to do something with us and the relationship is very, very good," he added.

The world's two largest economies said in a joint statement on May 12 after two days of talks in Geneva that they recognised "the importance of their bilateral economic and trade relationship to both countries and the global economy".

China will also hold off or remove all non-tariff countermeasures it has taken against the US since April 2, the statement said.

"The surprise breakthrough signals that both Washington and Beijing are under mounting pressure to stabilise markets without conceding core positions," Dr Dan Wang, China director at political risk consultancy Eurasia Group, told The Straits Times.

She said that the sharp tariff cuts "suggest that Mr Trump wants a headline win" ahead of the next election cycle, even if the deal for now "lacks substance beneath the surface".

"Beijing, in turn, is buying time by using the 90-day window to reduce economic uncertainty without making structural commitments," she added.