• U.S. Treasury Secretary Scott Bessent describes current tariff levels as a "floor," signaling potential for future reductions but no further hikes.
  • Temporary 90-day tariff reductions agreed: U.S. tariffs drop from 145% to 30%, China’s from 125% to 10%, effective by May 14, 2025.
  • New consultation platform established to negotiate long-term solutions, though skepticism remains about resolving deeper trade disputes.

A Tentative Thaw in U.S.-China Trade War

U.S. Treasury Secretary Scott Bessent framed the current tariff regime on Chinese goods as a "floor" during remarks following high-level negotiations in Geneva, suggesting that while further reductions are possible, the aggressive hikes of early 2025 are unlikely to return. The comment came as both nations agreed to a 90-day cooling-off period, with the U.S. slashing tariffs from 145% to 30% and China reciprocating by cutting its rates from 125% to 10%. The reductions, set to take effect by mid-May, aim to stabilize trade flows that had neared a standstill.

"This isn’t a ceiling—it’s a floor," Bessent said, according to people familiar with the discussions. "The goal now is to build from here." The agreement includes a new bilateral consultation platform, a diplomatic mechanism intended to prevent the kind of rapid escalation that brought trade between the two economies to the brink of collapse. Market reaction was cautiously optimistic, with S&P 500 futures rising 0.8% after the announcement.

Structural Challenges Remain

Despite the progress, analysts warn the temporary truce doesn’t address core issues like intellectual property protections and state subsidies. China’s export-driven sectors, which faced potential job losses in the millions under the higher tariffs, welcomed the relief but remain wary. "The 90-day window is a reprieve, not a resolution," said a Beijing-based trade adviser who requested anonymity due to the sensitivity of the talks.

Non-tariff barriers—such as China’s restrictions on U.S. agricultural imports—were not part of the deal, leaving key industries exposed. The IMF’s recent downgrade of China’s growth forecast, citing trade risks, underscores the fragility of the détente. Meanwhile, the U.S. retains leverage: Bessent emphasized that tariffs could "snap back" if negotiations stall, a scenario some investors are already pricing into longer-term contracts.

Correction: An earlier version misstated the effective date of the tariff reductions; the correct deadline is May 14, 2025.