The trade war between the United States and China, which had been escalating, will enter a 90-day truce. During this period, both countries have decided to reduce the tariffs they imposed on each other by 115 percentage points each. If an agreement is not reached within these three months, the U.S. tariff on China will return to 54%, and China's tariff on the U.S. will return to 34%. Attention is being paid to whether the trade war, which has shaken the global economy, can stabilize.
According to state-run Xinhua News Agency and Bloomberg News on the 12th, both the U.S. and China acknowledged the importance of their economic and trade relations to both countries and the world economy, recognizing the significance of sustainable, long-term, and mutually beneficial economic and trade relations, and announced plans for adjusting tariffs.
◇ The U.S. has reduced tariffs to 30% and China to only 10%… 90 more days for additional agreements
First, the U.S. decided to lower the additional tariff of 145% imposed on China during the Trump second administration to 30%. Donald Trump, the President of the United States, imposed a total of 20% tariffs of 10% each in January and March after taking office last year and imposed another reciprocal tariff of 34% in April for the purpose of addressing the trade deficit. In response to China's retaliation, this was increased by 91 percentage points to 125%. The U.S. will cancel this 91 percentage points, but will suspend 24% of the reciprocal tariff of 34% for 90 days. Along with the remaining 10%, the 20% tariff imposed in February and March will be maintained, so China will have to pay a tariff of 30% for the time being.
China also decided to suspend or eliminate all tariffs of 125% on the U.S., leaving only 10%. Until February and March, China had imposed retaliatory tariffs only on some U.S. imports, but starting from the 2nd of last month, China began full-scale responses to the U.S. reciprocal tariff, imposing a tariff of 34% on all U.S. imports. Subsequently, on the 8th and 9th, it increased tariffs to 84% and 125%, but decided to cancel all remaining 91 percentage points, leaving only the 34%. Of this, 24% will be postponed for 90 days. Non-tariff measures such as export controls on rare earth materials announced since the 2nd of last month will also be canceled or temporarily suspended. The U.S. and China aim to finalize these tariff adjustments by the 14th.
Having gained 90 days, the U.S. and China plan to narrow their trade-related differences. They stated in a joint statement, "In light of recent discussions between the two sides, we believe that continuous consultations will help resolve concerns between the two parties in trade and commerce," and they will continue related work in the spirit of mutual opening, continuous communication, cooperation, and mutual respect. Besant noted at a press conference, "Both sides do not want decoupling."
◇ Urgent economies of both countries reached an agreement quickly, but... the embers of conflict still exist
The fact that the U.S. and China produced these results just two days after starting negotiations reflects the urgent economic situation of both countries. The U.S. saw its growth rate decline by -0.3% in the first quarter compared to the previous quarter, marking its first quarterly contraction since -0.1% in the first quarter of 2022. While China grew more than 5% year-on-year in the first quarter, the growth rate of exports is gradually slowing, and the domestic downturn is not easily resolved.
However, the possibility of the trade war between the U.S. and China reigniting cannot be ruled out. If an agreement is not reached during the grace period, U.S. tariffs on China will rise back to 54%, and China’s tariffs on the U.S. will rise to 34%. Bloomberg noted, "China demands the elimination of all tariffs imposed by the U.S. this year, which is incompatible with the U.S. goal of reducing or eliminating the trade deficit." According to Jamison Greer from the Office of the United States Trade Representative (USTR), the U.S. is reporting a trade deficit of $1.2 trillion (approximately 1,702.2 trillion won) with China.
The fact that the U.S. imposes a tariff 20% higher than China due to the influx of the synthetic opioid fentanyl is also one of the embers that could escalate tensions between the two countries. China has asserted, "We are one of the countries with the strictest drug control policies and thorough enforcement in the world," and has called for the immediate elimination of that tariff.
During Trump’s first term, the U.S. and China also entered negotiations after a trade war, but ultimately did not achieve results. The U.S.-China trade war, which began in July 2018 when the U.S. imposed a 25% tariff on $34 billion worth of Chinese products, continued for about 18 months with additional tariff impositions and negotiations until signing the Phase One trade agreement in January 2020. At that time, China promised to increase purchases of U.S. agricultural products and energy by $200 billion but failed to deliver. Bloomberg stated, "The trade deficit with China surged during the COVID-19 period, leading to the current trade war."
Meanwhile, China evaluates the results of this negotiation as "its own victory." The state-run China Central Television (CCTV) operated social media account Weiyuantantian stated that "the substantial progress made is closely related to China's actions" and "after the U.S. so-called reciprocal tariffs were abused, China was the first country to retaliate against reciprocal tariffs." It continued, "If seeking unity through struggle, then unity remains," adding, "This communication outcome is what both countries have achieved based on previous struggles." The phrase "If seeking unity through struggle, then unity remains" is attributed to Mao Zedong, the founder of the People's Republic of China.
Chinese media Guancha also stated through social media, "The joint statement issued at the U.S.-China Geneva economic and trade talks represents a significant victory for China in the trade war and is a result of China's perseverance in the struggle," adding, "Compared to countries that have no courage to fight back against U.S. trade bullying, the weight of this victory is even heavier."