The United States and China agreed, at least temporarily, to dial back high tariffs imposed in April.
Following negotiations in Geneva on Monday, U.S. Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent announced the U.S. is lowering its 145% tariffs on Chinese imports to 30%. In return, China will lower its tariff rate on U.S. goods from 125% to 10%. Those rates will remain in effect for 90 days as the two nations work to hammer out a new trade deal.
Bessent told reporters on Monday that the high tariffs had created the equivalent of an embargo, something neither country wants.
“We want more balanced trade, and I think that both sides are committed to achieving that,” Bessent said.
In March, President Donald Trump imposed a 20% import tariff on all Chinese goods to combat what he says is that nation’s role in the fentanyl trade. On April 2, Trump announced he would levy an additional 34% “reciprocal” tariff on imports as part of his “Liberation Day” announcement.
Chinese officials responded with a retaliatory tariff of 34% on all U.S. imports. This prompted Trump to increase the U.S. reciprocal tariff rate on China to 84%. China countered with its own 84% tariff.
On April 9, Trump announced he was backing off reciprocal tariffs on most nations for three months to work out new trade deals. However, he increased the reciprocal tariff rate for China to 125%, Trump said this was due to the “lack of respect” that China has shown to global markets.
China matched the U.S. move with its own 125%, tariff on U.S. goods, setting the state for a major showdown.
Monday’s trade deal essentially rescinds all of those reciprocal and retaliatory tariffs. It leaves in place Trump’s 20% tariff due to fentanyl and a 10% tariff he imposed on all nations.
Will this deal help farmers?
Bruce Blythe, senior editor of commodity markets at Farm Progress, notes that signs of de-escalating tensions between the U.S. and China could ease fears of a protracted trade war. The tit-for-tat tariff showdown threatened to tank demand for U.S. agriculture products. News of a possible détente between the two nations helped push soybean prices to an 11-weeek high in overnight trading between May 11 and 12.
Dan Halstrom, U.S. Meat Export Federation president and CEO, praised the efforts of Greer and Bessent to negotiate the agreement with their Chinese counterparts.
“Although this is a temporary pause, we are hopeful that it is the first step toward restoring access to China for U.S. pork and beef,” Halstrom said in a May 12 public statement.
American Soybean Association officials were also pleased by the temporary pause in tariffs. However, ASA President Caleb Ragland cautions that while his group welcomes progress on the trade front, the reduced tariff levels remain as high as the ones in place at the height of the 2018 trade war.
When China’s baseline tariff and retaliatory tariff rates are combined with its baseline most favored nation rate and its value-added tax, the effective import duty for U.S. soybeans going into China is 34%. This rate is far from consequential, according to Ragland.
“Products purchased from our competitors in Brazil and Argentina are not burdened with this extra cost. That means China will turn to South America first for its purchases and only buy U.S. soybeans when it absolutely must,” he said in a May 12 press release. “Also important to note, the 90-day pause will end in August — right before our harvest season.
“We need the administration to continue its negotiations with China to find a long-term, sustainable solution that removes retaliatory tariffs and protects market access for our agricultural products.”
According to ASA data, 54% of soybean exports, representing more than $13 billion in value, went to China during the most recent marketing year.
What happens next?
According to a joint statement issued by China and the U.S., both countries recognize the importance of their trade relationship and its mutual economic benefits. The two nations also agree that continued discussions have the potential to address each side’s concerns.
The U.S. and China committed to establishing a “mechanism” to continue economic and trade discussions. The two sides may meet in China, the U.S. or an agreed-upon third country. Greer and Bessent will represent the U.S. side. China will be represented by He Lifeng, vice premier of the State Council.