Temporary Trade Truce

.S. President Donald J. Trump joins Xi Jinping, General Secretary of the Chinese Communist Party and President of China, at the start of their bilateral meeting Saturday, June 29, 2019, at the G20 Japan Summit in Osaka, Japan.

The US and China agreed to a 90-day pause on most tariffs yesterday, easing tensions in the ongoing trade dispute between the world’s two largest economies. Under the deal, the US will reduce its tariff on Chinese goods from 145% to 30%, while China will lower its tariff on American imports from 125% to 10%. The deal aims to allow further negotiations, with President Donald Trump expected to speak with Chinese leader Xi Jinping this week.

The 30% rate includes a 20% duty imposed earlier this year, targeting Chinese efforts to curb fentanyl shipments, along with a 10% baseline tariff applied to most countries. Tariffs from Trump’s first term—affecting more than $300B in Chinese goods—will remain in place, as will targeted tariffs on steel, aluminum, and autos. China also agreed to ease some nontariff barriers, including easing restrictions on rare earth material permits to the US.

The deal, described as an “executive agreement” rather than a formal treaty, does not require Senate approval. US stock markets rose on the news (S&P 500 +3.3%, Dow +2.8%, Nasdaq +4.4%).