In a significant move to de-escalate ongoing trade tensions, the United States and China have agreed to a 90-day truce, reducing tariffs and pausing non-tariff countermeasures. This agreement, reached on May 12, 2025, during trade talks in Geneva, marks a pivotal moment in the protracted trade dispute between the world's two largest economies.

Under the terms of the truce, the U.S. will lower tariffs on Chinese goods from 145% to 30%, while China will reduce tariffs on U.S. imports from 125% to 10%. Additionally, China has committed to pausing or eliminating non-tariff countermeasures, including halting the addition of U.S. companies to restrictive trade lists and lifting certain export controls. The truce is set to last until July 8, 2025, providing a window for further negotiations aimed at resolving broader trade disputes.

The trade conflict intensified earlier this year when the U.S. imposed a 145% tariff on Chinese goods in February, citing concerns over trade imbalances and intellectual property rights. China retaliated with a 125% tariff on U.S. imports and implemented non-tariff measures, including export controls on rare earth minerals and blacklisting certain U.S. companies. These actions led to a near-total breakdown in trade between the two nations, prompting urgent negotiations to prevent further economic fallout.

The announcement of the 90-day truce had immediate positive effects on global financial markets. On May 13, 2025, the Dow Jones Industrial Average surged by 1,160 points (2.8%), the S&P 500 rose by 3.3%, and the Nasdaq increased by 4.3%. This rally was driven by optimism that the easing of trade tensions would bolster economic growth and corporate earnings. Economists estimated that the truce could boost the U.S. economy's growth by 0.4 percentage points during a period of slight contraction.

U.S. Treasury Secretary Scott Bessent emphasized the importance of the agreement in preventing further economic damage and expressed hope for a more comprehensive deal in the future. Chinese Vice-Premier He Lifeng highlighted the mutual benefits of the truce and the commitment to resolving trade disputes through dialogue. China's state-backed newspaper, the Global Times, welcomed the agreement but suggested that the 90-day period might be too short to address all issues, advocating for an extension to ensure sustained cooperation.

The trade war has had significant social implications in both countries. In the U.S., industries such as agriculture and manufacturing faced challenges due to reduced exports and increased costs of imported components. Farmers, in particular, were adversely affected by China's tariffs on agricultural products. In China, the manufacturing sector experienced disruptions, leading to concerns about employment and economic stability. The truce offers a temporary reprieve, but uncertainties remain about the long-term resolution of these issues.

Trade disputes between the U.S. and China have occurred in the past, but the scale and intensity of the 2025 conflict are unprecedented. Previous disagreements were often resolved through negotiations without resorting to such high tariffs. The current truce is notable for the significant reduction in tariffs and the commitment to addressing non-tariff barriers, indicating a more comprehensive approach to resolving trade tensions.

The 90-day truce provides a window for further negotiations aimed at resolving broader trade disputes. However, the short duration may necessitate an extension to address all issues comprehensively. The agreement marks a substantial de-escalation in the ongoing trade war, potentially stabilizing global markets and supply chains.

The U.S.-China agreement to reduce tariffs and pause non-tariff measures represents a significant step towards easing trade tensions. While the 90-day truce offers a temporary reprieve, the success of future negotiations will be crucial in determining the long-term stability of bilateral trade relations and the broader global economy.