The United States and China have reached a landmark agreement to significantly reduce tariffs on each other's goods for an initial 90-day period, marking a major de-escalation in the trade war between the world's two largest economies, CNN reported. Announced on Monday, May 12, 2025, following intense weekend negotiations in Geneva, Switzerland, the deal has sparked a rally in global markets and optimism among investors, particularly in the technology and semiconductor sectors.
The agreement, detailed in a joint statement, stipulates that by May 14, the US will lower its tariffs on Chinese goods from 145% to 30%, while China will reduce its levies on American imports from 125% to 10%. However, US President Donald Trump's 20% fentanyl-related tariffs on China, imposed earlier this year, will remain in place. Both nations also committed to establishing a mechanism for ongoing economic and trade discussions, led by US Treasury Secretary Scott Bessent, US Trade Representative Jamieson Greer, and Chinese Vice Premier He Lifeng.
"This is a substantial de-escalation," said Mark Williams, chief Asia economist at Capital Economics, though he cautioned that US tariffs on China remain higher than those on other major economies, CNN noted. Analysts from Commerzbank highlighted that, despite the rollback, tariffs are still significantly elevated compared to pre-Trump levels. Neil Wilson, a strategist at Saxo, suggested that the US may still be pursuing a form of economic decoupling from China, despite Bessent's assurances to the contrary.
Bessent emphasized a desire for balanced trade, stating at a Geneva press conference, "The consensus from both delegations is neither side wants to be decoupled… We do want trade. We want more balance in trade," according to CNN. In an MSNBC interview, he added that the talks offered a chance to rebalance economies, with China showing unprecedented understanding of US concerns about fentanyl.
The trade war, intensified by tit-for-tat tariffs since April, has taken a toll on both economies. The US economy contracted in the first quarter since early 2022, as importers rushed to stockpile goods before higher tariffs, CNN reported. In China, exports to the US plummeted last month, and factory activity shrank at its fastest pace in 16 months, prompting Beijing to roll out new stimulus measures. US port officials noted no cargo vessels had left China for major West Coast ports in the past 12 hours, a phenomenon unseen since the Covid-19 pandemic.
Global markets responded enthusiastically. Hong Kong's Hang Seng index climbed 3.4%, while Germany's DAX and France's CAC rose 1.2% and 1%, respectively, CNN reported. US futures also surged, with the Dow poised to open 2.1% higher, the S&P 500 up 2.7%, and the Nasdaq up 3.6%. The US dollar strengthened, and Brent crude oil prices rose 2.8%.
The technology sector saw significant gains, as reported by CNBC. NVIDIA, a leading semiconductor firm with a market cap of $2.777 trillion, saw its stock rise 4% to $121.986 in premarket trading, reflecting relief over eased China tariffs despite ongoing chip export restrictions. Other chipmakers like AMD and Broadcom gained 5%, while Qualcomm also rose 5%. Taiwan Semiconductor Manufacturing Co.'s US-listed shares jumped 4%, and Europe's ASML rallied 4.5%. Apple, reliant on Chinese manufacturing, saw shares climb over 6% after projecting $900 million in tariff-related costs this quarter. Amazon, dependent on Chinese suppliers, surged more than 8%. Chinese tech firms like Alibaba and JD.com also posted gains.
"This morning is a huge win for the bulls and a best case scenario," said Daniel Ives of Wedbush Securities, predicting new market highs in 2025 as trade talks progress, CNBC reported. However, the temporary nature of the 90-day truce has tempered optimism, with analysts warning that deeper structural issues remain unresolved.
In a related development, President Trump is set to sign an executive order today to lower drug prices by reviving his "Most Favored Nation" policy, which ties certain medicine payments to prices in other countries, CNN reported. The policy, blocked by courts in 2020 and rescinded by President Biden in 2021, will be announced alongside Health and Human Services Secretary Robert F. Kennedy Jr.
Trump's upcoming Middle East trip to Gulf nations, including Qatar, where he may accept a luxury jet as Air Force One, has raised ethical concerns, CNN noted. Meanwhile, US Secretary of State Marco Rubio reaffirmed the US push for an immediate ceasefire in Ukraine, amid European talks and Russia's refusal to agree to a 30-day truce, CNN reported.
