The deal comes days after the Trump administration announced its contract with the UK.
The US and China agree to a transaction that lowers tariff levels
The US and China agreed to a trade agreement after face-to-face meetings with senior economic officials.
The US and China said Monday they agreed to cut mutual tariffs as the world’s two biggest economies are spurring fears of inflation and recession and ending a trade war that has disrupted financial markets around the world.
The US market surged higher after Treasury Secretary Scott Bessent told reporters that both sides agreed to exceed 100 percent points. The US will cut the additional charges charged on Chinese imports in April from 145% to 30%, while the Chinese duties for US imports will fall from 125% to 10%. The new measures will be effective for 90 days.
President Donald Trump said in a briefing early Monday that key elements of the transaction include the removal of “non-financial” trade barriers from China’s pledge to the open market. He said China also agreed to block fentanyl flow to the US.
The transaction does not include tariffs on automobiles, steel, aluminum or medicines, Trump said. He said he plans to talk to Chinese leader Xi Jinping, “maybe at the end of the week.”
“We’re not trying to hurt China,” Trump said. “They were so happy to be able to do something with us.”
China’s Commerce Ministry said the agreement “lays the foundation for filling the differences and deepening cooperation.”
Bescent and trade representative Jamieson Greer began meeting with Chinese counterparts in Geneva on May 10th – just days after the Trump administration announced its contract with the UK.
Monday’s announcement was “clearly just the beginning” of broader, more comprehensive negotiations, Wedbush Securities Analyst Dan Ives said in a memo. This could mean new highs in markets and tech stocks in 2025. Ives said he believes the tariffs are already causing economic damage, but the 90-day suspension means supply chain concerns will be “significantly reduced.”
This is a “big victory for the market and the bull,” Ives writes.
Chris Zaccarelli, chief investment officer at Northlight Asset Management, said the stock market’s all-time high in 2025 was on the table in 2025 after a suspension with China, the US’s “most difficult and potentially important” trading partner.
“The market has been very positively responding to the news that the Trump administration had ultimately used tariffs as a negotiation tactic,” Zaccarelli said in an email.
Tarist tariffs will have “significant economic impacts,” according to Federal Reserve Governor Adriana Coogler. Kugler said even the average rates announced today are “still far higher” than in recent decades. It is likely that economic growth will be slower and higher inflation will mean that businesses can quickly pass higher costs to their customers.
“Given these expected price increases, real revenues will fall, operating costs will rise, and consumers will be demanding less final goods and services, and businesses will demand fewer input,” Kugler said in preparation for Monday’s event at the Central Bank of Ireland.
Coogler said changes in trade policy made it difficult to judge the growth of the US economy. She supported the Fed’s decision last week to stabilize interest rates, saying she believes the Fed is “well-placed” for changes to the macroeconomic environment.
Trump said the ceasefire mediated between India and Pakistan on May 10 evaded a potential nuclear war and the contract stemmed from the threat of halting US trade. He praised the leadership of both countries for “strength, wisdom and fortitude” in order to retreat from the conflict.
“They made it hot and heavy, and it seemed like it didn’t stop,” Trump said. “I said, ‘Now, we’re going to do a lot of business with you guys. Let’s stop it. Let’s stop it. If you stop it, we’ll do business.”
His deputy prime minister of China, his Lifeeng described the Sunday meeting as “fun, detailed and constructive,” and said, according to Chinese national media, “significant progress has been made and a significant consensus has been reached.”
“This was a bigger escalation than expected… The negotiation process could remain difficult,” said Linsongg, chief economist at Greater China at the Bank of Netherlands.
At 2pm ET, the Blue Chip Dow and the wider S&P 500 were above 2.5%, while the high-tech NASDAQ rose by more than 4%. The benchmark’s 10-year financial yield reached 4.457%. Click here for details.
– – Medra Lee
Investment Bank JPMorgan raised forecasts for China’s economic growth on Monday after announcing the announcement of a contract with the US to defeat the country’s trade war.
“The magnitude of temporary tariff cuts is greater than expected,” a US bank analyst said in a statement. The exchange of 34% “mutual” US tariffs on China was “surprisingly positive” with the 10% “universal” tariffs that other countries face too.
Analysts estimated that if maintained for the remainder of the year, the tariff rate would allow China’s full-year GDP growth to reach 4.8% compared to previous forecasts of 4.1%.
The executive order, signed on Monday, directs the government to take action against “discriminatory” policies abroad that curb drug prices overseas. The order directs the Ministry of Health and Human Services to adopt a policy that sets prescription drug prices in line with that of a comparable country.
Greer and the Commerce Department have been instructed to take action against “irrational and discriminatory policies in foreign countries that curb drug prices overseas,” White House officials in the background told reporters before the order was signed.
According to a 2024 report from HHS, drug prices in the US are almost triple in 33 comparative countries, with the gap rising.
Trump said on social media, drug prices will be reduced by just “above 59%!” However, critics argue that pharmaceutical companies can play the system by securing rebates transactions with foreign governments, thereby keeping our drug prices high. Others say that if the pharmaceutical industry loses profits, it could curb medical innovation. Trump’s executive order has been his attempts, as well as his attempts to lower drug prices during his first term, to face legal challenges.
– – Swapna Venugopal Ramaswamy and Ken Alltucker
Contribution: Reuters
