Global markets saw a surge in stocks, oil and the dollar on Monday after the United States and China suspended almost all tariffs on each other’s goods for 90 days. The deal agreed after two days of talks in Geneva is a dramatic de-escalation of a trade war that threatened to halt trade between the world’s two biggest economies.
China will cut its tariff on US goods to 10 per cent from 125 per cent, which American tariffs on Chinese goods will fall to 30 per cent from 145 per cent. The US tariff on Chinese goods includes a 20 per cent levy imposed last February because Washington said Beijing was not doing enough to stop the export of chemicals used to make the drug fentanyl.
S&P 500 and Nasdaq futures rose 3.1 per cent and 4 per cent respectively. The US dollar rose 1.4 per cent against a basket of its peers and the renminbi strengthened. Gold fell 3.2 per cent. Brent crude oil gained 3.8 per cent to $66.36 (€59.75) a barrel. The Iseq was up almost 2 per cent at lunchtime.
China agreed to remove non-tariff measures imposed on the US in response to the tariffs, including an export ban on some rare earths and the blacklisting of some American companies.
“After taking the aforementioned actions, the Parties will establish a mechanism to continue discussions about economic and trade relations”, China and the US said in a joint statement on Monday morning.
Treasury secretary Scott Bessent and US trade representative Jamieson Greer will take the lead on the American side and vice premier He Lifeng will head the Chinese delegation.
A close associate of Xi Jinping for 40 years, He is the Chinese president’s top economic adviser and has played a leading role in wooing foreign investors in recent years. Speaking in Geneva on Monday morning, Bessent suggested that the structured negotiations could be far-reaching in their scope and impact.
He said the US economy had become unbalanced so that it was like a barbell with financial services and the tech economy at one end and natural resources, notably energy, on the other.
“But in between, precision manufacturing ... has been wiped out, and it is our intent to bring that back. We want to rebalance, and I think that there is a big opportunity,” he said.
“The Chinese, they have gone the other way. They are unbalanced in terms of overproduction in the manufacturing sector. They have stated but have not yet rebalanced toward a more consumption-oriented economy. There is a chance if we can open up trade to China, have more fair trade toward the US, that we could rebalance together.”
The Chinese delegation in Geneva included a senior national security official who led parallel talks to US officials about fentanyl. Bessent hinted that these talks could soon reach a deal that could see the US dropping the tariff on Chinese goods to 10 per cent from 30 per cent.
Mr Bessent and Mr Grier took questions from reporters in Geneva after the joint statement was published but China’s foreign ministry had little extra to say, referring questioners to the text itself.
“China and the US gain from co-operation and lose from confrontation,” foreign ministry spokeswoman Mao Ning said.
The deal, which surpassed the most optimistic expectations ahead of the Geneva talks, is likely to produce a surge in trade between the US and China as exporters and importers take advantage of the 90-day reprieve. It also represents a reprieve for the global economy and could set the tone for Washington’s negotiations with other countries it has threatened with punitive, “reciprocal” tariffs.
In advance of the talks in Geneva, Mr Bessent had warned that the level of tariffs between the US and China amounted to an effective trade “embargo”.
US business leaders including JPMorgan chief executive Jamie Dimon had in recent weeks urged Beijing and Washington to hold talks, as signs of the economic damage from the stand-off mounted.
In a meeting with Mr Trump, the chief executives of Walmart and Target warned that the tariffs would lead to empty shelves in their stores.
But until recently, there were few signs that either country was willing to negotiate, with Beijing officials accusing the US administration of bullying and vowing not to capitulate.
In contrast to increasingly hostile comments particularly from Beijing ahead of the negotiations, both sides emphasised the co-operative atmosphere of the talks and the US held out the possibility of an agreement on stopping the flows of fentanyl precursors from China into the country. – Additional reporting Financial Times
