Closing post
Time to recap, after a day in which peace broke out in the trade wars.
Global stock markets are rallying after the US and China slashed tariffs for 90 days in a de-escalation of the two country’s trade war.
In a surprise move this morning, the US and China both agreed to cut the tariffs imposed in the last month by 115 percentage points, in a 90-day pause. The move lowers the US tariff on Chinese goods from 145% to 30% (including a 20% levy as part of the US fentanyl crisis) with China’s tariff on US goods dropping from 125% to 10%.
Announcing the agreement in Geneva this morning, following talks with China, US treasury secretary Scott Bessent said neither side wanted a decoupling.
Bessent added:
“We do want trade, we want more balanced trade, and I think that both sides are committed to achieving that.”
Bessent later told Bloomberg that it was implausible that the US tariff on China could be cut below 10% in a final deal – while the 34% originally announced on 2 April (before the two sides sank into tit-for-tat retaliation) was a likely ceiling.
China’s commerce ministry said the agreement reached with the US was an important step to “resolve differences” and “lay the foundation to bridge differences and deepen co-operation”.
Donald Trump hailed a “total reset” in relations between China and the US after the countries agreed a 90-day pause to the deepening trade war that has threatened to upend the global economy, with reciprocal tariffs to be lowered by 115 percentage points.
“They’ve agreed to open up China,” the US president claimed at a press conference at the White House on Monday morning, having spent months escalating tensions with Beijing by ratcheting up tariffs on the country’s exports.
Analysts welcomed the breakthrough, while warning that a ceasefire did not necessarily mean a lasting peace between the US and China also trade. There are also concerns that the US economy has been damaged by the weeks of trade conflict with other countries.
One strategist said that Trump had ‘blinked’, and like a typical bully had backed down when someone hit him back.
Stocks are rallying in New York, where the Dow Jones industrial average is now up 891 points, or 2.1%, at 42,141 points.
In Europe, shares in German carmakers rallied amid hopes of an easing in the trade war – although Bessent cautioned this morning that the EU had been slower to enter negotiations than the UK or Switzerland.
There were strong gains in China today too, where the CSI300 index jumped over 1% and Hong Kong’s Hang Seng gained 3%.
Donald Trump has revealed that he will speak to Chinese president Xi Jinping “maybe at the end of the week”.
The US president added:
“We have some other things we’re doing.”
Speaking in the Oval Office, Trump says the US “achieved a total reset with China” after “productive” talks in Geneva last weekend.
He says the agreement, which lowered US tariffs on China to 30% for 90 days, “doesn’t include [those] that are already on … on cars, steel, aluminum … or tariffs that may be imposed on pharmaceuticals”.
Our US Politics Live blog has all the details:
Consumer goods makers, and retailers, are among the top risers on Wall Street.
These companies faced a heavy financial cost from high tariffs on Chinese exports, so will benefit from the cut to 30% over the next 90 days.
Amazon are the top riser on the Dow Jones industrial average, up 7.5%, closely followed by Nike.
Construction equipment maker Caterpillar (+5.4%), a bellwether of growth prospects, are also in the top Dow risers, as are Apple (+5%), which makes many of its iPhones in China.
The Russell 200 index, which tracks smaller US company stocks, is up 3.9% at a six-week high.
Traders will be relieved that those small American companies won’t face a 145% tariff when they buy goods from China, with the tariff now lowered to 30%* for the next 90 days.
* – it’s 30% because the 10% reciprocal tariff agreed by the US and China last weekend is on top of America’s 20% tariff on Chinese imports to prompt Beijing to help fight the fentanyl crisis.
Wall Street surges on US-China trade war ceasefire relief
DING DING goes the opening bell on Wall Street, and UP UP goes the US stock market.
The main indices are rallying hard at the start of trading. Investors are hailing the news that the US and China have agreed to cut tariffs sharply, in a 90-day trade war ceasefire.
The Dow Jones industrial average, which tracks 30 large US companies, has leapt by 954 points, or 2.3%, to 42,203 points.
The broader S&P 500 index has jumped by 2.6%, as traders welcome this morning’s announcement that the tariffs imposed by the two sides in the last month will be lowere sharply, by 115 percentage points.
Tech stocks are bouncing, sending the Nasdaq Composite index up by 3.6%.
Kathleen Brooks, research director at XTB, says Donald Trump’s Liberation Day is a distant memory for financial markets.
Stocks are surging, safe havens are rapidly declining, and expectations for Federal Reserve rate cuts have been dramatically scaled back.
The driver is the suspension of tariffs between China and the US. The US has reduced tariffs on Chinese goods from 145% to 30%, and China has reduced tariffs on US goods to 10%.
The US Treasury secretary has said that tariffs won’t decline from this level, but he said that the deal brokered this weekend will bring an end to the trade embargo between the world’s two largest economies and is the end of de-escalation.
Bessent: implausible that China tariffs will be below 10%
Treasury secretary Scott Bessent has said it is ‘implausible’ that the US tariff on Chinese imports will be set below 10%.
(reminder: 10% is the new ‘reciprocal’ level set on Chinese goods for the next 90 days, plus the 20% tariff imposed under the White House’s fentanyl crackdown).
Bessent explains that both sides agreed they do not want a generalised decoupling, during their talks in Geneva.
The US, though, wants a “strategic decoupling”, Bessent adds, focused on “items that we discovered during Covd were of national interest”, such as semi-conductors, medicines and steel.
Q: What is achievable in the next 90 days?
Bessent says we’ll see. But whatever happens has to be fair to the American people.
He reminds us that China’s reciprocal tariff was set at 34% on 2 April, when Trump announced new tariffs on countries, before being raised to 125% – plus 20% – after Beijing retaliated.
Q: So are the new levels a ceiling, or a floor?
It’s obviously a floor, Bessent shoots back. China is now at the same level as everyone else who didn’t retaliate last month – that global tariff of 10%.
[However, you might remember that Donald Trump initially announced rates higher than 10% on many countries, before pausing them for 90 days after the markets tumbled].
34%, the assigned level for China on 2 April, is a ceiling, he adds.
He says the two sides have now agreed a process to avoid a repeat of the “unfortunate turn of events” that led to the US and China retaliating against each other.
Q: are you saying that tariff rates will only go up from here?
“I’m not saying they’re going to go up, but it would be implausible that they would go below 10,” Bessent replies.
Updated
“Well, that de-escalated quickly”.
That’s ABN Amro’s take on this morning’s trade war ceasefire between the US and China.
They told clients:
After weekend talks in Geneva, the US and China announced a significant de-escalation of the tariff war, exceeding expectations
• For the next 90 days, instead of 145%, China faces the 10% baseline + 20% fentanyl-related tariffs, with no further reciprocal tariffs
• Instead of 125%, the US faces 10% tariffs on exports to China
• Last Thursday, the US and UK also reached a trade agreement that predominantly limited downside risks
• The trade deals set the tone for the EU – 10% is likely a floor
• We expect to modestly raise our growth forecasts
Of course, any increase in tariffs is likely to be bad news for the global economy, as it will slow trade flows.
It is also going to be painful for US consumers, as they pay tariffs on imports.
George Lagarias, chief economist at Forvis Mazars, warns that while the US-China trade deal may be good news in the short term, they may not outweigh increasing uncertainty.
Lagarias adds:
“Despite a very positive market reaction to the US-China pause it would be premature to celebrate a breakthrough in the global trade impasse. A “business deal” with the UK and a “pause” with China don’t constitute comprehensive “trade deals”.
Time will show whether the global supply chain is robust enough to sustain such uncertainty without a costly and inflationary adjustment to cover uncertain outcomes. A 10% tariff base scenario between the US and the rest of the world, is still an adverse economic outcome.”
With imports from China now incurring a 30% tariff, down from 145%, there is now arguably a cap on how high America may set tariffs on other nations.
And with the UK still facing the 10% universal tariff, despite last week’s trade deal, we can also see a floor on those tariff rates.
George Saravelos, currency analyst at Deutsche Bank, explains:
The UK has one of the least imbalanced relationships with the US and now has a universal tariff rate of 10%. China has one of the most imbalanced relationships and now has a tariff rate of 30%.
It is reasonable that these two numbers now set the bounds of where American tariffs will end up this year, a material increase in visibility from just last week. The China ceiling is of course the most notable; it is materially lower than many market participants would have assumed at the start of the year. Also of note is the implicit open-ended nature of the 90-day tariff pause (Bessent: “as long as talks are on track”) and persistent references to a desire to avoid economic decoupling.
Saravelos also argues that the global growth outlook is improving, thanks to lower trade tensions, many countries planning fiscal easing, and oil prices having fallen.
And thirdly, he reckons the Trump administration is shifting to a less aggressive stance across multiple fronts.
Saravelos explains:
Other notable developments include the departure of Elon Musk from DOGE, explicit statements from President Trump he will not seek Powell’s removal, a more conciliatory stance towards Ukraine following the bilateral Zelensky - Trump meeting in the Vatican.
The one policy area where uncertainty remains very high is the US fiscal stance, with visibility still low on how the Republican fiscal hawks and doves will reconcile their differences. The US budget is critical in obtaining greater medium-term visibility for US growth, the Fed and the dollar: it is likely the only material fiscal event during the entirety of the Trump administration.
Stocks are creeping higher in London, where the FTSE 100 share index is now up 56 points, or 0.66%, at 8611 points.
It’s on track to end the day at its highest close since 1 April, the day before Donald Trump’s “Liberation Day” tariff announcement.
German shipping company Hapag-Lloyd has welcomed the agreement between the United States and China to temporarily slash reciprocal tariffs.
Hapag-Lloyd says it expects to see increase in bookings from China to the US.
It told Reuters:
“We expect bookings from China to the U.S. to increase, which should help us ... into peak season.
“Originally, we had planned to use smaller ships for transports from China to (the U.S. coasts) but may reverse that if demand is strong.”
Bank of England policymaker Megan Greene has warned today that measures of wage growth and inflation are still too high, even though they’re moving in the right direction.
Greene explained that she was worried about rising public inflation expectations.
Speaking at the Bank of England Watchers conference today, Greene said:
“What’s a little bit more worrisome for me is that medium-term inflation expectations have also started picking up.”
Greene was one of the five policymakers who voted to cut UK interest rates by a quarter of one percentage point last week, to 4.25%, in a three-way split.
Channelling Natalie Imbruglia, Greene revealed:
“I came into this last round quite torn about whether to hold or cut by 25 basis points.”
Aberdeen: Tariff cuts are a 'big deal'
Today’s US-China tariff cuts are “a big deal”, says Paul Diggle, chief economist at investment group Aberdeen.
Diggle explains:
Taking everything into account we estimate the average US tariff on China is now 27%. As a result, the US weighted average tariff rate is now c. 12%, well down from the post-liberation day peak of 28%.
With talks continuing, the key issues are whether a full deal to lower tariffs permanently in exchange for mutually beneficial concessions can be agreed. We think probably yes, but at tariff levels which, while well down from the peaks, will be up from where they were at the start of Trump’s 2nd term (and maybe up from here). While both sides came out of the talks saying they weren’t seeking “economic de-coupling”, the US highlighted “five or six strategic industries” (think pharmaceuticals or steel) where it’s looking for “strategic rebalancing”.
Diggle adds that “an underlying slowdown” is probably getting underway in the US economy, with other economies also weakened by the trade war.
Away from financial markets, in the real economy, businesses will still be delaying investment decisions. However, this probably reduces some of the recessions risks.
It’s important not to over-extrapolate, the more markets are up, the more Trump may feel he can push again. And the economic slowdown is only just getting underway.
In the rest of the world there is still a growth slowdown and inflation reduction coming, even if not as severe as feared immediately post liberation day. So we expect lower growth, lower inflation, lower interest rates, in the likes of the UK.”
Government borrowing costs are rising today too.
The yield, or interest rates, on US 10-year Treasury bills has risen by 7 basis points (0.07 percentage points) to 4.44%, with other Treasury yields also higher.
That may reflect improved sentiment in the markest today, as investors rotate out of safe-haven assets.
Investors have also been trimming their expectations for interest rate cuts, which would imply higher bond yields.
But even so, this market reaction may not please US treasury secretary Scott Bessent, who has previously said his focus is on keeping 10-year U.S. Treasury yields low (to lower the cost of rolling over America’s debt pile).
A large 90-day coordinated tariff reduction by the world's two largest economies – from 125% to 10% for China and from 145% to 30% for the US – has spurred major global market movements, including higher stocks and bond yields, a stronger dollar, a rise in oil prices, and lower… pic.twitter.com/TtsPf8TcVA
— Mohamed A. El-Erian (@elerianm) May 12, 2025
Wall Street is on track for a strong rally when trading begins in New York.
Investors are expected to welcome the news that the US and China have de-escalated their trade war, following negotiations in Geneva last weekend.
The Dow Jones industrial average is up 2.5% in the futures market, while the broader S&P 500 is on track to rally by over 3%.
Gold has dropped notably today, as investors shun safe-haven assets.
The price of an ounce of gold is now down 3.4% today at $3,211, as riskier assets such as shares are snapped up instead.
Analysts at Dutch bank ING have lifted their forecast for China’s growth this year, following this morning’s agreement with the US.
ING predict there will now be a jump in exports from China to the US, which had dropped once American imports importers faced paying a 145% tariff on goods.
Lynn Song, ING’s chief economist for Greater China, explains:
In terms of impact on China’s growth, the 90-day ceasefire will upgrade our second and third quarter growth outlook. We suspect that China’s May and June exports to the US will bounce back sharply as importers with depleted inventories will take advantage of the ceasefire to resume imports. Depending on how talks proceed, we could see a frontloading of exports again in July and August, especially if there is not much clarity on a longer-lasting bargain being struck heading into the later stages of the 90-day period.
We are reverting our forecast for the year back to 4.7%, with further upside possible if a bilateral agreement is reached within the 90-day period.
*ING UPGRADES CHINA GDP FORECAST TO 4.7% FOR 2025 AFTER US DEAL
— Max HarryHindsight Capital (@MaxDrake007) May 12, 2025
Over in Toyko, there are reports that Nissan Motor has decided to cut another 10,000 jobs globally.
Added to previously announced cuts, it would increase Nissan’s total layoffs to about 20,000 or 15% of its workforce, Japan’s public broadcaster NHK reported.
Last month, Nissan announced it expects to lose as much as £4bn this year, as its turnaround plan proves more costly than expected. Like other carmakers, it has also been hit by Donald Trump’s tariffs, which include new levies on cars made overseas.
Maersk: US-China deal is a step in the right direction
Danish shipping group Maersk has welcomed the de-escalation between the US and China.
Maersk says the agreement to introduce a 90-day pause on tariffs and reciprocal duties was a step in the right direction.
Maersk’s share price has surged by 12.5% this morning, which reflects relief in the markets about this morning’s announcement.
Cranswick shares tumble after Lincolnshire pig farm cruelty claims
Back in the City, shares in UK meat producer Cranswick have tumbled after Tesco, Sainsbury’s, Asda and Morrisons all suspended supplies from a Lincolnshire pig farm linked to abuse against pigs.
Cranswick is the biggest faller on the FTSE 250 index of medium-sized companies, down 7.5%.
My colleague Sarah Butler reported yesterday:
Secretly filmed footage has shown farm workers at Northmoor Farm appearing to grab piglets by their hind legs and smashing them on to the hard floor – a banned method of killing known as blunt force trauma or “piglet thumping”.
Other harrowing footage from the farm owned by one of the UK’s biggest pig meat producers, Cranswick, showed a sow being kicked and beaten with metal bars, as well as a botched killing that left an animal writhing in agony, as first reported by the Mail on Sunday.
One worker who failed to kill a sow with several shots from a bolt gun, reportedly told an undercover investigator: “Don’t let nobody see you doing like what we did [sic].”
A truce, although welcome, is not the same as a peace treaty.
Mark Williams, chief Asia economist at Capital Economics, points out that “a lasting ceasefire” can’t be guaranteed, telling clients:
The US and China have each suspended for 90 days all but 10% of their Liberation Day tariffs and cancelled other retaliatory tariffs.
This is a substantial de-escalation. However, the US still has much higher tariffs on China than on other countries and still appears to be trying to rally other countries to introduce restrictions of their own on trade with China.
In these circumstances, there is no guarantee that the 90-day truce will give way to a lasting ceasefire.
Talk of “trade deals” has helped undo the damage from Donald Trump’s Liberation Day, reports Dario Perkins, economist at TS Lombard.
The ever-quotable Perkins gives credit to Treasury secretary Bessent, saying:
Equities have bounced even with tariffs much higher than at the start of the year, and with massive uncertainty about what the next six months will bring.
It helps that Scott Bessent has become the main spokesman for Trump 2.0. He has a real talent for sanewashing policies to make them look intellectually coherent and “market friendly”.
Updated
AJ Bell: Agreement to roll back tariffs is 'a pleasant surprise'
“Markets have welcomed the tentative US-China trade agreement with open arms,” says Russ Mould, investment director at AJ Bell.
“While the trade spat has only been dialled back for 90 days, it’s a major breakthrough as far as investors are concerned. The fact the two countries were talking was already a major win given they’ve been at each other’s throats during the first and second Trump presidential terms.
“Some people thought the best-case outcome from the weekend’s discussions would be an agreement to simply keep talks going. Therefore, to have reached an initial deal so quickly and one that rolls back tariffs by a large amount is a pleasant surprise.
“The UK-US trade deal last week made it perfectly clear that Trump wasn’t going to get rid of tariffs completely. If one of its greatest allies is forced to still have a 10% base tariff, there is no way that tariffs on China would have disappeared completely upon a trade deal.
“Lowering tariffs on Chinese goods from 145% to 30% is a big deal and one that significantly lessens the blow to the Asian economy. As ever, it’s clear that these deals aren’t even sided. China is cutting duties on US imports from 125% to 10%. That’s the same percentage point reduction as on the other side of the coin, but the US is still subject to lower tariffs.
“The next 90 days are going to be crucial in determining the longer-term tariff levels between the two countries. It would only take China upsetting Trump once for him to rip up the 90-day deal and revert back to sky-high tariffs. China won’t want to come across as weak in any discussion and is certainly not a push-over, yet it will be cognisant of the situation’s fragility.
Full story: China and US agree 90-day pause to trade war
China and the US have agreed a 90-day pause to the deepening trade war that has threatened to upend the global economy, with reciprocal tariffs to be lowered by 115 percentage points.
Speaking to the media after talks in Geneva, the US treasury secretary, Scott Bessent, said both sides had shown “great respect” in the negotiations, my colleague Amy Hawkins writes.
Bessent said: “The consensus from both delegations this weekend was neither side wants a decoupling”.
More here:
A spokesperson for China’s ministry of commerce has said today:
“This move meets the expectations of producers and consumers in both countries, as well as the interests of both nations and the common interest of the world.
“We hope that the US side will, based on this meeting, continue to move forward in the same direction with China, completely correct the erroneous practice of unilateral tariff hikes, and continually strengthen mutually beneficial cooperation.”
Strategist: The USA just surrendered to China
Donald Trump has ‘blinked’ in his trade war with China, says Bill Blain, market strategist at Wind Shift Capital.
Blain dubs today’s agreement for the US and China to cut their tariffs to just 10% is a “classic bully story”, saying:
Bully hits someone. Someone hits back. Bully stands down.
Blain explains that Treasury secretary Scott Bessent has stepped the USA back from the brink of a trade conflict with China which it would have lost, telling clients:
This morning’s step down will confirm the growing global realisation Trump is a dog that barks, but only bites much smaller dogs. He threatens, he postures, he steps back from the fight every time. His repeated climb downs, and his now increasingly desperate need to be seen to be doing deals, means fewer and fewer folk are scared by him.
It also raises the fundamental issue – the USA can’t afford a trade war. The USA is indebted to the tune of $36 trillion. Trump is promising the big beautiful bill to cut taxes. But as DOGE’s failure showed, he can’t cut spending.
Blain reckons the US may just have averted a catastrophic trade induced crash, but could still suffer a “stagflationary shock”, as the trade war will have just growth and push up prices. More here.
https://t.co/3ymglO0GNK
— Bill Blain (@Bill_Blain) May 12, 2025
Trump has not read Sun Tzu. “In the midst of chaos there is opportunity.”
Trump blinked. 42 days after “Liberation Day” China gets a 10% base tariff level, putting it on better trade terms than the EU? It was a ramble of conflicting narratives, but the…
The oil price has pushed higher too.
US crude is up 2.2%, while benchmark Brent crude is 2% higher at $65.25/barrel, the highest in around two weeks.
That suggests fears of a protracted trade war, hurting global growth, are easing.
Analyst: De-escalation seems better than we could hope for
The agreement to cut tariffs between the US and China is better than hoped, reports Neil Wilson, UK investor strategist at Saxo Markets.
Stocks are soaring on Monday as the US and China have struck a trade deal after productive talks in Switzerland. We’d heard overnight that the two countries had made “substantial progress” on trade talks, which helped lift the mood but seemed fairly innocuous. This morning we got a bit of a surprise and a jolt higher as the de-escalation seemed better than just about anyone could hope for. There are some other measures still in place, but basically the US will cut tariffs on Chinese goods to 30% from 145% for 90 days, while China will lower its tariffs on US goods to 10% from 125% for 90 days.
This is buying time for a more comprehensive deal – allows for time for the process and ‘mechanism’ in the words of Treasury Secretary Bessent to take place. But he also stressed that strategic rebalancing of the global economy is still underway, although “neither side want a decoupling”, which is the sort of commentary the market is going to lap up. But it is not true – the US is absolutely trying to decouple.
Pound hits four-week low as dollar rallies
The dollar has rallied strongly after the US and China agreed to steep reductions in tariffs for the next 90 days.
The dollar index, which measures the greenback against a basket of currencies, has jumped by 1.2% today.
The pound has dropped by 1.3 cents, to a four-week low of $1.317.
The euro has lost almost a cent and a half, down to $1.11.
Here are a few photos from this morning’s briefing in Geneva, with Jamieson Greer and Scott Bessent
European stock markets jump after China and US agree to slash tariffs
Stock markets across Europe are rallying strongly, as investors hail the news that the US and China have agreed a 90-day pause to their trade war.
Germany’s DAX index has jumped by 1.5%, amid optimism that the trade war is cooling.
Automakers are among the top risers in Frankfurt, with Mercedes-Benz (+5.5%), Daimler Trucks (+5.5%) and BMW (+5.4%) all gaining.
France’s CAC index has risen by 1.2%.
There is general relief that tariffs are being cut between the US and China, at least for the 90-day window of opportunity.
Ahmad Assiri, research strategist at brokerage Pepperstone, says:
Economically, this step back in tariffs is not a structural fix or a comprehensive deal. But it signals a change in tone or at the very least a political willingness to pause.
Under the surface, this move seems more like an effort to buy time. It may help pave the way for more serious talks over the coming three months. Markets read this as a sign that progress is possible. Not guaranteed, and not permanent, but at least it’s a step forward.
London’s market is lagging, though, with the FTSE 100 index only up 10 points, or 0.03%.
Mining stocks are jumping in London, such as Glencore (+6.3%), and Anglo American (6.2%).
But, the market is being dragged back by AstraZeneca (-4%), after Donald Trump promised to use his executive powers to cut the price of prescription drugs in America.
Weapons maker BAE Systems (-3.5%) has also dropped, after European leaders called for unconditional 30-day ceasefire in Ukraine.
The White House has released a joint statement outlining the agreement reached at the US-China economic and trade meeting in Geneva.
It confirms that the two sides are both cutting the reciprocal tariffs on each others goods by 115 percentage points, and are “moving forward in the spirit of mutual opening, continued communication, cooperation, and mutual respect”.
Scott Bessent and Jamieson Greer also have warm words for the way the Swiss government looked after them during their weekend of negotiations in Geneva.
Bessent says Switzerland, like the UK, have “moved to the front of the queue” for a trade deal (a nod to the agreement announced between Washington and London last week).
The EU, though, has been “much slower”, he adds.
Greer explains that the Swiss opened up the grounds of the residence of the Swiss ambassador to the United Nations fro the talks, and that “most important discussion on the most challenging issues” took place “under a large, beautiful tree on a set of patio sofas”.
US trade anbassador Jamieson Greer also outlined why the Trump administration was determined to reshape global trade.
Greer says the US spent decades at the World Trade Organization, and holding multilateral and bilateral negotiations, trying to get other countries to reduce their tariffs and non-tariff barriers, and to agree more reciprocal trade with the US.
The promise of the WTO and the multilateral system is that everyone’s tariffs were going to come down, Greer tells reporters in Geneva, adding:
It turned out, the US went down significantly. There were other economies that had low tariffs as well, but retained very high non-tariff barriers. We have tried really hard to work within the system. And the net result [is] the $1.2 trillion deficit in goods, the net result is manufacturing went to China, East Asia, Mexico, etc.
As such, it’s not realistic to sugges the US should just have kept talking, he adds.
The US side also suggest that they have agreed a “very good mechanism” to avoid unfortunate escalations with China over trade in future.
Asked about the details of the new tariffs between the US and China, trade ambassador Jamieson Greer explains that today’s agreement is based on the reciprocal tariff which was imposed by the United States on 2 April, and the escalatory steps which followed by each side.
He says the Chinese side and the US side ended up at 125% on each other’s imports. “That has all come down by 115% to 10% each”, Greer says (in the 90-day pause announced this morning).
In addition, the US imposed 20% related to fentanyl, Greer points out (which is why the US total tariff level was reported at 145%). That levy, imposed by Donald Trump to encourage China to reduce the flow of fentanyl into the US, is on its own track.
So, the US reciprocal tariff on imports from China is dropping to 30% under the deal agreed last weekend, while China’s levy drops to 10%.
However, there are also “sector-specific” tariffs which the US charges on imports of, for example, steel and cars.
Scott Bessent reveals that “the upside surprise for me from this weekend” was the level of Chinese engagement on the fentanyl crisis in the US.
Lots of praise from Bessent on this, too .. GREER: 'FENTANYL' TARIFF TALKS ON CHINA ON 'POSITIVE' TRACK
— Ozan Korman Tarman (@ozanktarman) May 12, 2025
Updated
Bessent also suggests there is a possibility of agreeing purchase agreements with China, that could help lift the US trade deficit with China “into balance”.
Scott Bessent says there was a consensus from both the US and China delegations at last weekend’s talks that “neither side wants a decoupling”.
Bessent adds that the US wants more balanced trade; he thinks both sides are committed to achieving that.
US and China agree 90-day pause - to cut tariffs by 115%
Newsflash: the US and China have agreed to lower tariffs on each other’s goods substantially for 90 days, following their negotiations last weekend.
Speaking in Geneva, treasury secretary Scott Bessent says that “both sides will move their tariffs down by 115%” (ie, 115 percentage points), having agreed a 90-day pause.
That’s a significant de-escalation in the trade war that blew up last month. Before today, the US had lifted its tariff on China to 145% (including the 20% tariff added to tackle fentanyl imports into the US), with Beijing having retaliated with 125% tariffs on US imports.
Bessent tells reporters that “both sides showed great respect” during their talks, and that “we both have an interest in balanced trade”.
Updated
Treasury secretary Scott Bessent and US trade representative Jamieson Greer are about to hold a press briefing now in Geneva, to discuss last weekend’s talks with China….
Iron ore prices have risen too, after the US and China reported progress in their trade talks.
The benchmark June iron ore contract on the Singapore Exchange is up 2.2%, to around $99 per tonne.
The most-traded September iron ore contract on China’s Dalian Commodity Exchange was up 1.5% earlier this morning, Reuters reports.
There are reports that US treasury secretary Scott Bessent will hold a briefing on the trade talks within the hour, in Geneva.
Bessent to brief on trade talks at 8am London time
— Michael Brown (@MrMBrown) May 12, 2025
Oil, a gauge of global growth prospects, has risen more than 1% today after the US and China both touted progress at their trade talks.
Brent crude, the international benchmark, has risen by 80 cents per barrel to $64.75/barrel, the highest level since 29 April.
China’s trade representative, vice commerce minister Li Chenggang, told reporters that what was agreed at the weekend of talks with the US in Geneva will be worth the wait.
Li explained:
“As we say back in China, if the dishes are delicious, the timing doesn’t matter,”
“Whenever it gets released, it will be good news for the world.”
Introduction: Stocks rise as US and China report progress in trade talks
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
A sigh of relief is sweeping global markets today, after the US and China both reported they made progress at a weekend of talks in Switzerland over the trade war.
Stocks have risen across Asia-Pacific markets, while safe-haven asset gold has dipped, on hopes of de-escalation in the trade war gripping the global economy.
The two sides have promised to release details about what was agreed later today, after both issuing encouraging statements on Sunday after the talks wrapped up.
Last night, the White House announced a “China Trade Deal” had been reached in Geneva.
Treasury secretary Scott Bessent described the talks as ‘productive’, saying yesterday:
“I’m happy to report that we made substantial progress between the United States and China in the very important trade talks. First, I want to thank our Swiss host. The Swiss government has been very kind in providing us this wonderful venue, and I think that led to a great deal of productivity we’ve seen. We will be giving details tomorrow, but I can tell you that the talks were productive.
US trade representative ambassador Jamieson Greer said it was a “very constructive two days” of talks, adding that “perhaps the differences were not so large as maybe thought”.
For Beijing, Vice Premier He Lifeng said the China-U.S. high-level meeting on economic and trade affairs were “in-depth, candid and constructive”.
He explained that the two countries have agreed to a new “trade consultation mechanism”.
That “mechanism” suggests a warming in relations between the two sides, who ratcheted up tariffs on each other’s goods last month, after Donald Trump announced his ‘“Liberation Day” levies on imports to the US.
🟢Chinese Vice Premier He Lifeng：The #China-#US high-level meeting on economic and trade affairs were in-depth, candid and constructive.
— Chinese Embassy in US (@ChineseEmbinUS) May 12, 2025
🟢The two sides have reached a series of major consensuses and have also agreed to establish an economic and trade consultation mechanism.… pic.twitter.com/o3s9kWdtlT
Markets have responded positively, even though neither side has yet released any specific details of possible points of agreement.
China’s CSI300 share index has risen 0.8%, while Hong Kong’s Hang Seng index is up 1.2%. Japan’s Nikkei has risen a more modest 0.3%. The futures market suggests the US markets will rally later today too.
Kyle Rodda, senior financial market analyst at capital.com, says:
It remains the case that there’s more style than substance when it comes to the trade policy narrative: not as much as a pledge to lower tariffs has been given, let alone a substantive and comprehensive deal. Nevertheless, what the US is touting as “productive” talks and Trump has labelled a “reset” is a clear statement of intent from the US to wind back existing tariffs.
The markets and negotiators are on the clock now to reach an agreement before the damage of existing tariffs begin to seriously weaken economic activity, especially in the US. So far, tariffs have had a negative but relatively modest impact on economic growth, with the labour market proving resilient and prices stable. Eventually, if the status quo remains, the levee will break and significant and hard to reverse damage will be done to the global economy.
We’ll hear from top central bankers in the UK today, as King’s College London hosts the annual Bank of England Watchers’ conference.
The agenda
9:00am BST: Bank of England deputy governor Clare Lombardelli gives keynote speech at the Bank of England Watchers’ Conference 2025
11:30am BST: Panel on the Monetary policy outlook including BoE policymaker Megan Greene
17:00pm BST: Fire-side chat with BoE policymaker Alan Taylor
