A Fragile Pause: US, China Slash Tariffs in Major Breakthrough
In a significant step toward de-escalating one of the most consequential economic stand-offs of the decade, the United States and China have agreed to roll back reciprocal tariffs by 115% for a 90-day period, effective April 9. This breakthrough came after marathon talks in Geneva, marking the first high-level engagement between Washington and Beijing since the intensification of their trade war under President Donald Trump’s second term.
As per the agreement, the US will reduce tariffs from 145% to 30%, while China will slash its tariffs from 125% to 10% on American goods. This temporary relief aims to facilitate a framework for long-term discussions, rebuild trust, and prevent further disruptions to the global economy.
How It Started: The Rise of a Trade War
The origins of this tariff war trace back to President Trump’s aggressive stance on what he termed “unfair trade practices” by China and other countries. Early into his second term, he reinstated his hardline trade policies, focusing on tariff reciprocity, wherein the US would match or exceed the import duties levied by trading partners.
At the height of the conflict, Trump threatened to hike tariffs on Chinese imports up to 245%, citing unbalanced trade deficits, intellectual property theft, and inadequate Chinese efforts to control fentanyl exports into the US. China responded in kind, raising tariffs to 125% on various US goods, including agricultural products, electronics, and vehicles.
While these measures were politically driven by protectionist ideals, their economic ramifications soon became apparent and widespread.
Global Shockwaves: Economic Fallout and Market Reaction
The tit-for-tat tariff increases between the world’s two largest economies shook global markets and triggered fears of a prolonged global economic downturn. International institutions like the IMF and World Bank warned that continued escalation could slash global GDP by up to 1.2% annually, disproportionately affecting emerging economies and export-driven markets.
Key financial markets responded instantly to the news of the temporary truce. Hong Kong’s Hang Seng Index surged 3%, while US futures—Dow Jones (+2%), S&P 500 (+3%), and Nasdaq (+3.5%)—all rallied on hopes of reduced uncertainty and renewed trade activity.
Commodities also showed positive movement, with oil and agricultural goods posting short-term gains, fueled by expectations of resumed exports and lower trade barriers.
Expert Opinions: Relief, But Not Resolution
Global trade analysts and economists have largely welcomed the development but cautioned against interpreting the 90-day truce as a final resolution. “This is not the end of the trade war—it’s a tactical pause,” said Dr. Lin Mei, a trade economist at the London School of Economics. “It provides breathing room, not a breakthrough.”
Scott Bessent, US Treasury Secretary and lead negotiator, emphasized that the tariff rollback is tied to continuous dialogue, particularly around long-standing US concerns on industrial subsidies, IP rights, and fentanyl trafficking. Bessent noted, “The Chinese understood the magnitude of the fentanyl crisis in the US,” but a 20% punitive tariff on related exports remains in force as negotiations continue.
Meanwhile, Vice Premier He Lifeng of China reaffirmed the country’s commitment to a “balanced and sustainable economic relationship,” but hinted at the need for mutual respect and non-interference—an implicit reference to US pressure on Beijing’s domestic policies.
The countries have agreed to alternate the venues for further negotiations, with talks to be held in China, the US, or neutral third-party nations.
What Lies Ahead: Fragile Peace or Strategic Realignment?
Though the current agreement provides relief from the escalating tariff spiral, it does not eliminate underlying tensions between the US and China. The structural challenges—ranging from technology transfer rules and cyber espionage to political distrust and military rivalry in the Indo-Pacific—still loom large.
What the world is watching for now is whether this temporary détente can evolve into a stable, enforceable trade framework, or whether it is merely a tactical move by both nations to recalibrate amid mounting domestic and international pressure.
For countries caught in the crossfire—India, the EU, ASEAN economies—this 90-day truce offers a window to stabilize export chains and prepare for possible long-term realignments in global trade dynamics.
Hope on Hold
The 115% tariff rollback marks a significant diplomatic and economic development in a trade war that had begun to spiral beyond bilateral dispute into a global risk. However, while this move has injected a degree of optimism into global markets and policymaking circles, the world remains cautiously hopeful.
The road ahead depends not only on continued dialogue but also on political will, economic foresight, and the ability to address deep-seated structural imbalances between the two powers. For now, the global economy breathes a little easier—but it still walks on a tightrope.
(With inputs from agencies)
