China and USA Hash Out Trade War Ceasefire After Two-Day Talks in Geneva
On Monday 12 May 2025, the Dow Jones Industrial Average (DJIA) jumped 1,000 points, or +2.5%, upon the publication of the joint communique by USA and China regarding a substantial drop in tariffs on both sides. At the same time, the Standards & Poor (S&P) 500 Index gained +2.85% and the tech-oriented Nasdaq Composite Index went up +4%.
Concretely, the uptick in stock prices basically erased all the losses since Trump’s ‘declaration of trade war on Liberation Day’, on the infamous 2nd of April 2025. It is to be recalled that on that day Trump slapped tariffs on the world and started escalating tariff on China up to 145%. Subsequently, China retaliated by raising tariff on US goods to 125% and the trade war between the two economic giants was on.
Over the weekend of starting on 10 May 2025, both sides sent representatives to a neutral site in Geneva to hash out an accord. The USA sent US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer, while the Chinese delegation was led by Vice Premier HE Lifeng and Deputy Commerce Minister LI Chenggang.
On Saturday, President Trump called for the urgent need to ‘reset the US-China relationship’ in the face of a potential global recession. Then, on Sunday, China issued a statement that the negotiations were ‘constructive’ and made ‘real progress.’
Based on the new deal, US slashed tariffs on Chinese goods from 145% to 30%, while China cut tariffs on American goods from 125% to 10%. The US has repeatedly indicated that it wants better access to the large and lucrative Chinese market. As trade tensions spiral upward, China imposed strict control on its export of #CriticalMinerals and Rare Earth Elements (#REE) needed by the US aerospace industry and even reneged on a contract with Boeing by suspending delivery of passenger jets. On the other hand, the US stopped export of #AI chips to China altogether causing tech stocks to tumble.
Wall Street was jubilant about the turn of events as the world avoided descending into doom as stocks prices and indices jumped up. Even the US dollar rose after a drop following the trade truce. This common understanding in principle is more signaling than anything as the devil in the details still need to be worked out.
At the end of the negotiations, both sides held a press conference but each country held the meeting with the media separately. The drop in tariff will come into effect as from Wednesday 15 May 2025 and will remain in effect for a 90-day window during which both sides will have the opportunity to delve into the modalities.