U.S.-China Trade War Eases as Tariffs Pause for 90 Days, Avoiding Potential Escalation
The United States and China have agreed to postpone an escalation of tariffs on each other’s goods for an additional 90 days, as per an executive order signed by President Donald Trump on Monday. This decision comes just hours before a deadline at 12:01 am ET, when tariffs on Chinese goods were set to increase from 30% to 64%.
The agreement, first reported by CNBC, averts a potential return of tariff levels that previously posed significant barriers to trade between the world’s two largest economies. The new rates for Chinese goods are yet to be disclosed, while American goods currently face minimum 10% tariffs.
The truce comes after President Trump implemented a series of reciprocal tariffs on international trading partners, resulting in effective tariff rates not seen since the Great Depression in the United States.
Increased tariffs on Chinese goods, a major source of imports for the U.S., would likely result in increased costs for numerous American businesses and consumers due to higher import taxes imposed by Trump.
Following a meeting in Sweden last month, Chinese negotiators suggested that an agreement had been reached. However, Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer, who attended the meeting, contested this, stating that no deal was final until approved by the President.
President Trump expressed optimism about his relationship with President Xi Jinping of China earlier on Monday, saying, “We’ll see what happens… The relationship is very good.”
At the conclusion of last month’s meeting with Chinese trade officials, Mnuchin warned his counterparts that continuing to purchase Russian oil would incur substantial tariffs under pending legislation that grants the President the power to impose levies up to 500%. It remains unclear if the administration is prepared to follow through on these threats.
Trump has recently threatened India, another significant purchaser of Russian oil, with a 50% tariff rate if it continues its purchases by the end of this month. The Indian government has criticized this move, claiming unfair targeting. Trump hinted that more countries could face similar penalties. “You’re going to see a lot more,” he said last week.
In a Fox News interview over the weekend, Vice President Mike Pence stated that tariffs on China are under consideration, although no decision has been made by the President.
Wendy Cutler, a former U.S. trade negotiator and now vice president of the Asia Society Policy Institute, commented, “Given that we seem to be headed toward some type of deal with China leading to some kind of meeting between Xi and Trump, the administration has definitely been more conciliatory towards China in the past few weeks.”
Should China comply with the administration’s demands to cease purchasing Russian oil, it would be done discreetly and gradually rather than through a public announcement on social media, according to Cutler.
Mnuchin also expressed concerns and regrets about China’s sales of over $15 billion worth of dual-use technology equipment (equipment with both commercial and military uses) to Russia and its purchase of sanctioned Iranian oil.
Other points of contention between the U.S. and China include exports of rare earth magnets, with China agreeing to increase exports but Trump stating that China has not fulfilled its obligations. The U.S. is also seeking an American buyer for TikTok, currently owned by a Chinese company, with Congress setting a deadline for the app to find new ownership or face a ban in the U.S.
U.S. stocks closed lower on Monday ahead of crucial inflation data scheduled for publication on Tuesday morning. This story is still developing and will be updated.