Sino-US additional tariffs sharply reduced to 10%, economists say "exceed expectations"

From May 10th to 11th, high-level economic and trade talks between China and the US were held in Switzerland. Around 3 PM Beijing time on the 12th, both countries simultaneously issued a joint statement on the Geneva economic and trade talks, pledging to significantly reduce the additional tariffs they had imposed on each other over the past month by no less than 115 percentage points before May 14, 2025, to continue advancing negotiations.

In specific terms, both sides will retain only 10% of the additional tariffs on each other's goods, canceling all other newly added tariffs. China had requested tariff reductions prior to the negotiation, and now this goal has been achieved, meaning China has won this round. It should be noted that this is merely a temporary three-month (90-day) tariff reduction. Thus, it is just the beginning of a long process. Both parties may require several more months to reach a final trade agreement.

However, this tariff reduction does not include the 20% tariffs that the US imposed twice in early February and early March this year due to the fentanyl crisis. This means that after the Geneva talks, the new Chinese tariffs on the US will be 10%, while the US tariffs on China will remain at 30%.

The joint statement also stated that after taking these measures, both countries will establish a mechanism for economic and trade relations consultations. The Chinese representative is Vice Premier He Lifeng of the State Council, and the US representatives are Treasury Secretary Scott Beesont and US Trade Representative Jamison Greer. Consultations can take place in China, the US, or any third country agreed upon by both sides.

After the issuance of the joint statement, spot gold fell below $3,220 per ounce, reaching its lowest level since May 1st, with an intraday decline of 3.21%. Generally, when facing economic uncertainty, gold prices rise; conversely, they fall.

This round of Sino-US negotiations represents a vastly different outcome compared to seven years ago. At that time, leading the US team was "hawkish" trade representative Lighthizer, who parted ways unhappily after the first negotiation with China.

This time, the US team leader is Treasury Secretary Beesont, considered a trade "dove" in Trump's cabinet. US media generally believe that the significant delay in tariffs on multiple countries was mainly due to his efforts. He received numerous complaints from business leaders.

Meanwhile, the economic pressures faced by both China and the US today are different from those seven years ago.

Before the negotiation, several CEOs of major American retail giants met privately with Trump, directly warning him that their tariff policies would lead to supply chain disruptions, stating "American consumers will see empty shelves in two weeks... and prices will inevitably rise." This warning prompted Trump to soften his stance on tariffs afterward.

Another pressure came from the US Treasury market. After implementing reciprocal tariffs, the yield on US Treasury bonds rose to 5% during Asian nighttime trading hours. This means that if the US Treasury issues new bonds, it must set higher yields; otherwise, there will be no buyers, which will greatly increase the financial pressure on the US government. As the second largest holder of US Treasuries on the surface (Japan is the first), China did not sell off US bonds, otherwise this pressure would have intensified.

To sum up, judging from the results of the Sino-US Geneva economic and trade talks, China has achieved a certain degree of victory to some extent.

Source: https://www.toutiao.com/article/1831916813820940/

Disclaimer: The article solely represents the views of the author.