US-China Agree to Slash Tariffs Amid Trade War De-escalation

In a significant development towards global economic stability, the United States and China have agreed to slash reciprocal tariffs by 115% as part of a 90-day truce in their prolonged trade war. The deal, finalized after high-level talks in Geneva between US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, marks a major step to ease tensions between the world’s two largest economies.

Why in News?

This agreement comes after years of escalating trade tensions between the US and China, which had led to hundreds of billions of dollars in tariffs, supply chain disruptions, and global economic uncertainty. The 115% reduction in reciprocal tariffs signals a shift toward cooperation and economic diplomacy.

Agreement Details

• Reciprocal tariffs reduced by 115%.
• A 90-day freeze on additional tariff measures.
• China to set tariffs on US goods at 10%.
• China suspends additional 24% tariffs and cancels 91% extra duties.

Background of Trade War

• US imposed 145% tariffs on Chinese goods.
• China retaliated with 125% tariffs on US imports and restrictions on rare earth exports.
• The conflict disrupted global trade and caused inflationary pressures.

Negotiation Process

• Talks held in Geneva between Scott Bessent (US) and He Lifeng (China).
• Described as “in-depth” and “candid” by Chinese officials.

Impacts on Global Trade

• Temporary economic relief and stability in global markets.
• India saw increased exports to the US due to diversion from China.
• China’s exports to the US fell 20% in April, but overall exports rose 8.1% YoY, buoyed by ASEAN trade.

Significance

• Reduces global economic uncertainty.
• Opens window for further diplomatic and trade negotiations.
• Enhances India’s potential role as an alternate supplier in global value chains.