US-China Trade Deal: Reciprocal Tariffs Paused for 90 Days Starting May 2025

On May 12, the governments of the US and China signed a trade agreement in Geneva, Switzerland, that marked a significant step in de-escalating the ongoing trade tensions between the two world's largest economies. Upon reaching an agreement, both countries removed or reduced imposed reciprocal tariffs for 90 days.

Impact of Trade Agreement

As announced by the White House, the US will remove additional tariffs imposed on China on April 8 and 9, 2025. However, all tariffs imposed before April 2, including those relating to steel, aluminum, automobiles, and auto parts, will remain.

Consequently, the US will reduce tariffs on most Chinese goods from a record high of 145% to a baseline of 10%, with an additional 20% tariff, for a total of 30% during a 90-day pause period. If the two governments do not agree before the 90-day pause period ends, the 10% baseline will increase to 34%. Therefore, the new potential effective rate for specified goods could rise to 54%.

Conversely, China will lower its tariffs on US goods to 10% and eliminate the recently imposed retaliatory tariffs and non-tariff measures. These measures became effective on May 14, 2025. Additionally, both countries have committed to implementing formal mechanisms for further trade negotiations.

Considering the economic interconnectedness between the two countries, the agreements represent a critical financial relief for cross-border companies and businesses, especially those operating in manufacturing, tech, and consumer goods industries. 

Conclusion

Due to the significant decrease in tariffs, from the US side on Chinese goods, from 145% to 30%, and from China on US goods, from 125% to 10%, businesses should determine the impact on their supply chains and cost structures. Nevertheless, companies should remember that these relief measures are short-term and that monitoring future negotiations and measures must be a priority. 

Considering the global impact of this agreement and the importance of the US-UK trade agreement, the US is expected to conclude similar agreements with other countries to reduce the adverse side effects of the imposed tariffs.

Source: The White House - Presidential Action, The White House - Briefing and Statements