Donald Trump welcomed a “full reset” of China-US relations after agreeing to a 90-day suspension of the deepening trade war that the country threatened to overturn the global economy.
“They agreed to open China,” the US president argued at a press conference at the White House on Monday morning, spending months in tensions with Beijing ratcheting tariffs on the country’s exports.
After talks in Geneva, US Treasury Secretary Scott Bescent said both sides showed “great respect” in negotiations. “The consensus from both delegations this weekend was that neither side wanted decoupling,” he said.
Wall Street rose sharply after the announcement, with the benchmark S&P 500 jumping 2.7% and Dow Jones Industrial Average rising 2.4% during early trading in New York.
The S&P 500, which endured a fierce sale as Trump strengthened his tariffs in China and most of the world, has overturned all of its losses since his “liberation date” announcement in April. Much of what he announced that day has since been shelved.
“The discussions in Geneva were very friendly,” Trump said. “We’re not trying to hurt China.”
The US president, who has for months claimed that tariffs could raise trillions of dollars for the US federal government, appeared to change the tack on Monday. “The biggest thing for me is the opening,” he said of China. “If we can come in and compete, I think it’s great for our business.”
In an incident that focused primarily on his administration’s efforts to lower drug prices, Trump signaled that he might change his focus to the European Union, which he now claims was “more troublesome” than China.
“We have all the cards,” the president argued using similar rhetoric to explain his relationship with the EU, which he used about China a few weeks ago. “They treated us very unfairly.”
The 90-day tariff reduction applies to the obligations announced by Trump on April 2. This ultimately escalated to 125% for most Chinese imports, and Beijing responded with comparable measures.
China has also imposed non-tariff measures, including restricting the export of important minerals essential to the manufacture of US high-tech goods.
US trade representative Jamieson Greer said China’s retaliation was unbalanced and amounted to an effective embargo on trade between the two largest economies in the world.
The 115% point deduction will reduce China’s duties on US goods to 10% and US taxes to 30%. That’s because US tariffs include the 20% rate Trump imposed before the latest trade war. The president has said it is related to China’s role in the US fentanyl crisis.
Fentanyl-related tariffs still apply, and Trump stressed that sector-specific US tariffs on automobiles, steel and aluminum will not be affected.
A spokesman for China’s Ministry of Commerce said:
“Based on this meeting, we hope that the US side will continue to move in the same direction as China, completely revise the false practice of unilateral tariff hikes and continue to strengthen mutually beneficial cooperation.”
The Chinese Yuan jumped to a six-month high with a signal that the trade war would be suspended. Some estimates show that up to 16 million jobs were at risk in China, but the US faced rising inflation and empty shelves thanks to the dizzying tariffs of the largest US supplier.
Bescent said he was impressed by the level of China’s involvement on the fentanyl issue during talks in Switzerland. “For the first time, China was realizing the magnitude of what was happening in the US,” Bescent said.
After the newsletter promotion
A joint statement released Monday by the US and China said both sides “continuing to carry out relevant work with a spirit of mutual openness, continuous communication, cooperation and mutual respect.”
William Singh, chairman of hedge fund Spring Mountain Pujun Investment Management, told Reuters: “The results are far beyond the expectations of the market. Previously, there was hope that two sides could talk about and that the market was very vulnerable.
Hu Xijin, former editor of nationalist Chinese tabloid The Global Times, said on social media the agreement was “a big victory for China in favor of the principles of equality and mutual respect.” Hu said on Weibo that the recently agreed UK-US trade agreement maintains a 10% US tariff on UK imports, but that “the UK did not implement any mutual action.”
“This is an unexpected achievement in Sino-US tariff negotiations,” said Wang Wen, principal of the Financial Research Institute at Lenmin University in Beijing.
However, Wang also urged caution as the agreement “does not represent a resolution of the structural contradiction between China and the United States, and does not imply that there will be no friction or serious differences between China and the United States in the future.”
European stock markets rose in the aftermath of the US-China announcement. Germany’s DAX index rose almost 1%, as Mercedes-Benz, Daimler Truck and BMW were among the biggest risers. France’s CAC 40 index has increased by 1.3%. Shares of Danish shipping group Maersk rose 12%.
Brent crude rose almost 3% at $65.75 a barrel, but the dollar index, which measures the greenback against a basket of currencies, jumped 1.2%.
After the US-China agreement was announced, analysts at the Bank of Dutch have lifted forecasts of China’s growth this year. ING has returned to forecasting a surge in exports from China to the US, predicting a 4.7% growth in the Chinese economy this year.
Additional research by Lilian Yang