U.S. and China Reach Tariff Agreement: Talks in Geneva Lead to Substantial Tariff Reductions, Alleviating Pressure on U.S. Consumers and Finances

In the middle of May 2025, during high-level talks in Geneva, Switzerland, the US and China reached an agreement on tariffs, temporarily easing the trade tensions that had been ongoing since early April. The US reduced tariffs on Chinese goods from 145% to 30%, while China reduced tariffs on US goods from 125% to 10%. This 90-day agreement aims to alleviate pressure on US consumers and financial market volatility, and create room for further bilateral trade negotiations.

Escalation and Turning Point of the United States-China Tariff Conflict

On April 2, 2025, President Trump of the United States announced the "Liberation Day" tariff policy, imposing a 10% basic tariff on all imported goods and implementing what he called "reciprocal tariffs" on countries with severe trade deficits, with the tariff rate on Chinese goods eventually raised to 145%. China quickly retaliated by imposing tariffs of up to 125% on US goods, leading to a new round of trade war escalation.

This tariff confrontation quickly impacted the economies of both countries. The US domestic consumer market was the first to be hit, with large e-commerce platforms like Amazon forced to delist a large number of Chinese-made products. Affordable brands like Shein and Temu raised prices due to soaring tariffs, making it difficult for lower-income consumers to afford. According to reports, 48% of low- and middle-income households in the US faced a decline in purchasing power, with shortages of consumer goods and rising prices becoming a common occurrence.

Meanwhile, financial markets experienced significant volatility. US stocks, bonds, and the dollar all fell simultaneously, with the 10-year US Treasury yield briefly dropping below 4%, indicating high market anxiety about the economic outlook. US trade partners like Taiwan and India were also affected, and the global supply chain faced restructuring pressures.

Swiss Talks: From Confrontation to Compromise

Under mounting pressure, the US and China held closed-door talks in Geneva from May 11 to 12. According to US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer, the two sides reached a preliminary agreement within just two days, suggesting that their differences on core issues could be bridged.

The agreement included reducing US tariffs on Chinese goods from 145% to 30%, while China would lower tariffs on US goods from 125% to 10%. Additionally, China agreed to suspend non-tariff retaliatory measures against the US since April 2, while the US retained the pre-April 2 Section 301, Section 232, and other existing tariffs.

This agreement took effect on May 14 and will last for 90 days, during which both sides will continue negotiations for longer-term trade arrangements. US officials emphasized that this agreement does not represent a comprehensive resolution of the trade dispute but establishes a "sustainable dialogue mechanism" for bilateral relations.

Consumer and Financial Pressures Lead to Concessions

The US concessions were closely tied to pressures in the domestic consumer market. According to reports, most affordable consumer goods in the US rely on Chinese imports, and soaring tariffs led to retail price surges, significantly reducing consumer purchasing power. Brands like Hershey, Harley-Davidson, and Nike stated that if high tariffs persisted, they would face revenue declines and sales difficulties.

Moreover, financial market instability was also a key factor in reaching the agreement. Several high-level officials within the Trump administration warned that the tariff policy was causing direct economic harm to its supporters, potentially affecting the political support base. According to The Washington Post, these warnings prompted the White House to quickly adjust its strategy and reopen negotiations with China.

On the Chinese side, although officials emphasized their ability to withstand economic war pressures, feedback from manufacturing and export companies indicated that some factories had closed production lines or stopped hiring, making life challenging for grassroots workers. This agreement provided breathing space for Chinese companies and helped stabilize domestic employment and social sentiment.

90-Day Buffer Period and Subsequent Negotiations

According to the agreement, the US and China will use this 90-day buffer period to conduct more in-depth trade negotiations. The US Treasury Department stated that future negotiations will focus on trade balance, intellectual property protection, and market access. China emphasized its willingness to promote the normalization of bilateral economic and trade relations on the basis of equality and mutual benefit.

Although the agreement does not cover all contentious items, the temporary tariff reduction has provided substantial relief for businesses and consumers in both countries. Several Chinese exporters reported that US buyers have resumed placing orders, and some factories have started resuming operations. US retailers expect that product prices will gradually stabilize, helping to ease inflationary pressures.

U.S. and China Reach Tariff Agreement: Talks in Geneva Lead to Substantial Tariff Reductions, Alleviating Pressure on U.S. Consumers and Finances

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