The United States and China have reached an agreement to pause tariff hikes on each other's goods for an additional 90 days, according to a White House official who spoke to CNN. This critical agreement comes just hours before a midnight deadline, where tariffs on Chinese goods were set to increase significantly from 30% to 64%. Without this pause, there was a substantial risk of reverting to the ultra-high tariff levels that had previously created an effective blockade on trade between the world’s two largest economies.
The news of this agreement was initially reported by CNBC and highlights the ongoing tensions in the trade relationship between the US and China. As it stands, the potential increase in tariffs would have had serious repercussions for American businesses and consumers, likely driving up prices due to greater import taxes. China, currently America's second-largest source of imports, would have imposed its own tariffs on American goods, which presently face a minimum of 10% tariffs.
In recent months, President Donald Trump has implemented a series of "reciprocal" tariffs against various trading partners around the globe, raising the effective tariff rate in the United States to levels not seen since the Great Depression.
Following a meeting in Sweden last month, Chinese negotiators suggested that a deal had been achieved; however, Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer refuted this claim, emphasizing that nothing was finalized without Trump's endorsement. Trump expressed optimism about the ongoing discussions, stating, “We’ll see what happens. They’ve been dealing quite nicely. The relationship is very good with President Xi and myself.”
During the previous meeting, Bessent raised concerns about China's continued purchase of Russian oil, warning that it could result in significant tariffs under existing Congressional legislation that allows Trump to impose levies of up to 500%. However, it remains unclear if the administration intends to follow through with these threats.
Recently, Trump also directed threats toward India, another nation purchasing Russian oil, suggesting a potential 50% tariff rate if India continues this practice. This move has drawn criticism from the Indian government, which feels it is being unfairly targeted. Furthermore, Trump hinted that additional countries might face similar measures, stating, “You’re going to see a lot more. So this is a taste.”
In a recent Fox News interview, Vice President JD Vance confirmed that tariffs on China remain a possibility, although Trump has yet to make a definitive decision. Former US trade negotiator Wendy Cutler noted that the administration has adopted a more conciliatory approach toward China in recent weeks, particularly as a potential meeting between Trump and Xi looms.
Cutler also pointed out that if China were to comply with the US demands regarding Russian oil purchases, it would likely occur quietly and gradually, rather than through a public announcement from Trump. However, several issues remain unresolved between the two nations.
Bessent expressed concerns regarding China’s sale of over $15 billion worth of dual-use technology equipment to Russia, as well as its procurement of sanctioned Iranian oil. Another contentious issue is the exportation of rare earth magnets, where China has agreed to increase exports, yet Trump alleges they have not fulfilled their commitments.
Additionally, the US is pushing for an American buyer for TikTok, which is currently owned by a Chinese company. Congress has set a timeline for the app to secure new ownership or face a possible ban in the US.
As these trade negotiations unfold, US stocks closed lower on Monday in anticipation of key inflation data set to be released on Tuesday morning. This is an evolving story, and updates will be provided as new information becomes available.
