After days of high-level negotiations, the trade standoff between the United States and China temporarily paused on Wednesday, with two of the world's largest economies slashing sweeping tariffs on each others' goods for 90 days. Washington and Beijing had agreed this week to pause the brutal trade war that has roiled global markets and international supply chains.
As part of the negotiations in Geneva, the United States has agreed to lower its tariffs on Chinese goods to 30 per cent while China is reducing its own to 10 per cent -- down by over 100 percentage points. The lower duties came into effect just after midnight in Washington on Wednesday, a major de-escalation in trade tensions that saw US tariffs on Chinese imports soar to up to 145 per cent, to which China responded with 125 per cent tariffs on US imports.
Trump On Trade Deal With China
A Day before the temporary truce came into effect, US President Donald Trump on Tuesday said Washington now has a blueprint for a "very, very strong" trade deal with China that would see Beijing's economy "open up" to US businesses.
"We have the confines of a very, very strong deal with China. But the most exciting part of the deal...that's the opening up of China to US business...One of the things I think that could be most exciting for us and also for China is that we're trying to open up China," he said in an interview with Fox News.
This came after both nations held successful negotiations over the weekend in Switzerland's capital to find a way out of the impasse.
US-China Trade War
Trump had upended international commerce with his sweeping tariffs across economies, wiping billions off equities and with businesses ailing. China was hit hardest by Trump's economic offensive. However, unwilling to budge, Beijing had responded with retaliatory levies that brought tariffs on both sides well over 100 per cent.
Trump's rollercoaster tariff row with Beijing has become a problem for US companies that rely on Chinese manufacturing, with a temporary de-escalation only expected to partially calm the storm.
And Beijing officials have admitted that China's economy -- already ailing from a protracted property crisis and sluggish consumer spending -- is likewise being affected by the trade uncertainty.
Trade War Not Over
Despite de-escalation in tensions, the deep sources of tension between the two global superpowers--the fentanyl issue-- remain. This resulted in the US additional tariff rate being higher than China's because it includes a 20 per cent levy over Trump's complaints about Chinese exports of chemicals used to make the drug.
Washington has long accused Beijing of turning a blind eye to the fentanyl trade, something China denies. And while the US said it sees room for progress on the issue, Beijing on Tuesday warned Washington to "stop smearing and shifting blame" onto it.
Analysts, meanwhile, warned that the possibility of tariffs coming back into force after 90 days simply piles on more uncertainty.
"Further tariff reductions will be difficult and the risk of renewed escalation persists," Yue Su, Principal Economist at The Economist Intelligence Unit, told AFP.
