In a surprising turn of events, the United States and China have agreed to a temporary pause in their heated trade war, slashing tariffs on each other’s goods for the next 90 days. Announced on May 12, 2025, this deal marks a significant step toward easing tensions between the world’s two largest economies, which have been locked in a tariff battle that saw levies soar to unprecedented levels. The agreement has sparked a rally in global stock markets, offering a glimmer of hope for businesses and consumers alike.
On May 10, 2025, U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer met with a Chinese delegation led by Vice Premier He Lifeng in Geneva, Switzerland. The first round of talks, which lasted over 10 hours, was described by President Donald Trump as a “very good meeting.” In a post on Truth Social, Trump announced that the negotiations had achieved a “total reset” in U.S.-China trade relations, conducted in a “friendly, but constructive, manner.” He expressed optimism about the progress, emphasizing his desire for China to open its markets to American businesses.
The deal, finalized on Monday, May 12, reduces U.S. tariffs on Chinese imports from a staggering 145% to 30%, while China will lower its tariffs on U.S. goods from 125% to 10%. This temporary reduction, effective from Wednesday, May 14, provides a 90-day window for further negotiations to address deeper issues, such as the U.S.-China trade deficit, which reached $263 billion last year, and concerns over China’s trade practices, including forced technology transfers and intellectual property violations. Other topics likely discussed include non-tariff barriers, labor standards, and the flow of synthetic opioid precursors from China.
The announcement sent Wall Street into a frenzy, with the S&P 500 climbing 3.26% to 5,844.19, its highest close since early March. The Dow Jones Industrial Average surged 2.81% to 42,410.10, and the Nasdaq Composite jumped 4.35% to 18,708.34. The CBOE Volatility Index, a measure of market fear, dropped below 20 for the first time since late March, signaling investor relief. “It’s a relief rally,” said John Praveen, managing director at Paleo Leon in Princeton, New Jersey. “The fall-out from tariffs will probably be more manageable now.”
For companies like Shein and Temu, the deal offers a critical opportunity to restock U.S. inventories. These Chinese e-commerce giants, which have surged in popularity, are expected to ship bulk products via container ships to avoid potential future tariff hikes. “This is great for Shein and Temu, if nothing else, to replenish their U.S. inventory,” said Yao Jin, a supply chain management professor at Miami University of Ohio.
In Beijing, residents expressed cautious optimism. “It’s definitely good news,” said Alex Xu, a local, to Reuters. “The trade war is a lose-lose situation for both sides.” Another resident, Doli Yan, was surprised by the speed of the agreement, noting, “I thought it would be a prolonged struggle.” However, Chinese businesses remain wary, expecting tariffs to rise again after the 90-day period.
Despite the progress, the road ahead remains uncertain. Trump has a history of threatening and then rescinding tariffs, leaving businesses on edge. Geopolitical tensions, including China’s support for nations like Iran and Russia, continue to complicate the relationship. For now, though, the tariff pause offers a brief respite, with Trump calling the reset “very good” and hinting at a future meeting with Chinese President Xi Jinping.