US and China Strike Major Tariff Truce: Global Markets Surge as Countermeasures Lifted

In a dramatic turnaround, the United States and China have made a mutual agreement to roll back tariffs and countermeasures across the board, marking a significant de-escalation in their lengthy trade war. The announcement, following intense high-stakes talks at Geneva, comes as both countries pledge to cut tariffs for a first 90-day period and suspend non-tariff retaliatory measures, sending hope through markets worldwide.

Key Highlights
Tariff Reductions:

The US will reduce further tariffs on Chinese imports from 145% to 30% for 90 days.

China will lower its tariffs on US products from 125% to 10% during the same duration.

Both will maintain a 10% starting tariff from previous actions, with the highest escalation since April 2 suspended now.

Elimination of Countermeasures

China is committing to eliminating or suspending all post-April 2 non-tariff countermeasures against the US, including export restrictions on rare earth minerals and investigations of US companies.

The US is going to amend or rescind three executive orders which in total had put 115% tariffs on Chinese imports and roll back extra duties imposed under the recent buildup.

Immediate Impact:

The reductions in tariffs and removal of countermeasures are to take effect by Wednesday.

Global equity markets rebounded in sympathy, with US and Asian market indices jumping as investor anxiety over an extended trade war dissipated.

Continuing Dialogue:

The two nations agreed to set up a formal system of ongoing economic and trade talks, headed by Chinese Vice Premier He Lifeng, US Treasury Secretary Scott Bessent, and US Trade Representative Jamieson Greer.

The talks will be rotated among China, the US, and possibly third nations, with working-level talks as required.

Political and Economic Context:

The pact comes after months of rising tariffs that rattled supply chains, damaged manufacturing, and increased consumer costs.

US officials, such as President Trump, have branded the deal a victory for American manufacturing, although critics caution that underlying trade deficits are still unaddressed.

Chinese state media celebrated the result as a move toward cooperation, while highlighting Beijing's adherence to its negotiating bottom lines.

Temporary Nature and Next Steps:

The tariff cuts are short-term, scheduled for 90 days, with both parties indicating that additional negotiations will decide if the truce is made permanent or results in more profound reforms.

Market and Industry Reaction
The move was greeted with zest by international investors. US and Asian stock markets recorded sharp advances, the US currency firmed, and gold prices declined as risk appetite picked up. Business organizations and economists welcomed the action but said that the underlying issues on US-China trade relations will need to be negotiated persistently.

What's Next?
Both governments have presented the agreement as a basis for a more stable and equitable economic relationship. The next few months will be decisive as the negotiators attempt to translate this temporary peace into a permanent settlement, as the world anxiously watches for further evidence of progress or recrimination.

Source: Reuters, CNN, Fox Business, White House, Al Jazeera