May 12, 2025: US and China Agree to Slash Tariffs for 90 Days
=The Epoch Times=
US and China Agree to Slash Tariffs for 90 Days
Markets around the world reacted positively to the announcement, with the U.S. dollar strengthening and the yield on U.S. Treasuries rising.
By Owen Evans
5/12/2025Updated: 5/12/2025 0:00 4:34
The United States and China said on May 12 they have agreed to a deal to slash reciprocal tariffs for 90 days.
Speaking after talks with officials from the Chinese communist regime in Geneva, U.S. Treasury Secretary Scott Bessent told reporters that the two sides had agreed on a 90 day pause on measures and that they will move their tariffs down.
Both economies have sought to end a trade war in which last month the United States slapped Beijing with a 145 percent tariff on Chinese goods, while the Chinese Communist Party hiked 125 percent levies on U.S. imports in retaliation.
“Both countries represented their national interest very well,” Bessent said.
“We both have an interest in balanced trade, the U.S. will continue moving towards that.”
Trade Representative Jamieson Greer said that the U.S.’s reciprocal tariff rate will go down to 30 percent, “so it goes down 115 percent.”
“And the Chinese on their side also go down 115 percent to 10 percent, and they remove the countermeasures that they have in place,” he added.
One reason President Donald Trump imposed tariffs on China (as well as Mexico and Canada) was that he said the Chinese regime has failed to take the necessary steps to curb the flow of the deadly drug fentanyl.
Trump also said the levies are a response to China’s “intellectual property theft, forced technology transfer, and other unreasonable behavior.”
Other measures the United States has put in place previously, whether that is tariff measures from 2018 or tariffs under other statutory authorities, those remain unchanged for now, Greer said.
“The Chinese and the United States agreed to work constructively together on fentanyl,” he added.
The White House said that both countries have committed to take the following actions by May 14.
In a statement China’s Ministry of Commerce said the high tariffs have “severely damaged normal bilateral trade and disrupted the international economic and trade order.”
“We have a process now. We have a meeting mechanism. We loosely christened it the ‘Geneva Mechanism,’” Bessent said in a follow up interview with CNBC’s Squawkbox.
In the next few weeks Bessent said he expects they would be meeting further to work on a more fulsome agreement.
“What we do want is a decoupling for strategic necessities, which we were unable to obtain during COVID,” Bessent said.
The United States will create and protect its steel industry, he said, adding that it will work on critical medicines and semiconductors.
Markets reacted positively to the deal.
Futures on the S&P 500 and Nasdaq jumped to 2.8 percent and 3.5 percent, while in Europe, the STOXX 600 rose 0.7 percent.
Hong Kong’s Hang Seng Index ended the day with 3% gains.
The U.S. dollar strengthened by 1.6 percent following news that tariffs had been suspended, pushing its value higher against the pound, euro, and yen.
The yield on 10-year Treasuries rose to around 4.44 percent.
Meanwhile, oil prices surged, with both WTI and Brent crude seeing increases in reaction to the news of easing trade tensions.
Gold prices, previously helped by previous safe-haven demand, dropped by 3 percent.
“The de-escalation of tensions between China and the U.S., with tariffs being reduced for 90 days, is reducing the demand for safe haven assets like gold,” said UBS analyst Giovanni Staunovo.
“Near-term prices are likely to stay volatile. But higher tariffs are still weighing on economic growth and likely force central banks to cut further interest rates later this year. Also central banks might use this price setback to add exposure,” he added.
When Trump first imposed his tariffs, European and Asian markets were rocked. For example, at the time, Hong Kong stocks fell dramatically, experiencing their biggest drop since 1997.
Speaking to reporters aboard Air Force One on April 6, in response to a question about the effect on the markets, Trump said, “I don’t want anything to go down. But sometimes you have to take medicine to fix something.”
Reuters contributed to this report.
May 2025: Revival of Shop Classes in U.S. Schools
High schools across the U.S. are reintroducing shop classes to prepare students for careers in skilled trades. Onekama Consolidated Schools in Michigan, for example, has reinstated its industrial arts program after a four-year hiatus, equipping students with practical skills and safety training. This trend reflects a broader national movement to address labor shortages in trades and offer alternatives to traditional college pathways.
May 2025: Abolition of Tariffs
The abolition of tariffs globally is unlikely in the near future, but there are definitely trends and movements toward reducing tariffs and simplifying trade barriers. The idea of completely abolishing tariffs runs into several challenges and political realities, but here’s an overview of why that is and what we might expect:
1. Political and Economic Realities:
- Protectionism vs. Free Trade: While many countries promote free trade and advocate for lower tariffs, there is also a strong protectionist sentiment, especially when it comes to sensitive industries like agriculture, steel, or technology. Politicians often use tariffs as a tool to protect domestic jobs, industries, or national security interests.
- Global Trade Tensions: Countries still use tariffs as leverage in trade negotiations, and certain political dynamics (like the U.S.-China trade war) show that tariffs can be used as bargaining chips in negotiations.
- Revenue Generation: For many developing countries, tariffs serve as an important source of government revenue, especially where tax systems are less developed or hard to enforce.
- Tariff Reduction, Not Abolition:
- While full abolition of tariffs isn’t realistic in the short term, there has been significant progress in reducing tariffs through trade agreements like the World Trade Organization (WTO) agreements, the European Union (EU) customs union, and bilateral trade deals like the USMCA or the EU-Japan Economic Partnership Agreement.
- These deals often focus on reducing tariffs for specific sectors or products (e.g., automotive, agriculture) or creating tariff-free zones in certain regions.
- Emerging Trends in Digital and Green Tariffs:
- Digital Trade: The rise of e-commerce and digital services is creating a push for new types of agreements that focus on reducing tariffs on digital goods, data flows, and services. Digital trade can reduce barriers and lower costs across borders, and there’s a growing momentum for governments to simplify digital trade regulations.
- Environmental Concerns: Another potential shift is the introduction of tariffs related to carbon emissions or sustainability concerns. Some countries (like the EU) are proposing or implementing carbon border adjustment mechanisms (CBAM), which could function like tariffs on goods based on their environmental impact (e.g., carbon emissions during production). These types of tariffs may increase in the coming years, especially if more countries push for sustainable trade practices.
- The Role of the WTO and Trade Blocs:
- The World Trade Organization (WTO) has been pushing for global tariff reductions for decades. While the WTO hasn’t been successful in pushing for broad tariff abolition, its agreements have led to significant reductions in tariffs over time.
- Regional Trade Agreements: Countries that form trade blocs like the EU, ASEAN, or the African Continental Free Trade Area (AfCFTA) are working toward more integrated, tariff-free economies within their regions. These efforts show that while complete global tariff abolition may not happen soon, regional tariff-free trade is becoming more common.
- Technological and Automation Trends:
- As automation and digital trade platforms evolve, some believe global trade systems could become more efficient and less reliant on traditional tariffs. For example, automation in customs processes could reduce the need for tariffs as a way to control and tax imports.
What’s Likely in the Future?
While complete abolition of tariffs isn’t something we can expect soon, gradual reductions and simplifications will likely continue, especially in trade agreements that foster cooperation between countries. For example:
- Free Trade Zones: Regional agreements (like the RCEP or EU agreements) could lead to tariff-free zones, where goods move without tariff barriers across participating nations.
- Sector-Specific Tariffs: Some industries (like tech or renewable energy) may see a push toward zero tariffs in an effort to promote innovation and global cooperation.
- Tariff Reforms: We might also see more targeted tariff reforms, such as carbon tariffs (addressing environmental concerns) or tariffs on goods from countries with poor labor rights practices.
In Conclusion:
So, while full abolition of tariffs seems unlikely due to economic, political, and strategic considerations, the trend is towards lower tariffs, especially in areas where global cooperation and economic integration are prioritized. The future will likely see more targeted tariff reforms, digital trade agreements, and regional trade pacts that reduce trade barriers without completely eliminating tariffs across the board.
April 2025: Tariff Negotiations are Fluid
Trade negotiations have been a big topic in recent years, especially with tensions between major economies. The nature of these negotiations can range from bilateral talks (between two countries) to multilateral discussions (involving multiple countries or regional groups). Some key areas where trade negotiations have been particularly active recently include:
1. US-China Trade Talks:
The trade relationship between the U.S. and China has been central to global trade negotiations. Under President Trump, the U.S. imposed significant tariffs on Chinese goods. While the Biden administration has adjusted some of these policies, discussions are still ongoing about intellectual property rights, market access, and tariffs. There’s been some movement towards a phase-one trade deal, but concerns about technology and security remain a big point of friction.
2. EU-US Trade Relations:
The U.S. and the European Union have been discussing various trade issues, including the imposition of tariffs on steel and aluminum, as well as disputes over digital services and agriculture. Both sides have shown interest in simplifying tariffs and reducing trade barriers, especially after the tensions under the Trump administration.
3. Regional Comprehensive Economic Partnership (RCEP):
The RCEP, signed in 2020, is a massive free-trade agreement between 15 Asia-Pacific countries, including China, Japan, South Korea, Australia, and New Zealand. It’s the largest free trade agreement by population and GDP, and it’s expected to significantly impact trade flows within the Asia-Pacific region. One of its main aims is to lower tariffs and harmonize trade rules to make cross-border trade easier.
4. UK-EU Post-Brexit Talks:
After the UK’s exit from the EU, trade negotiations between the two entities have been complex. The Brexit deal resulted in the UK leaving the EU’s single market, which meant the reintroduction of tariffs and customs checks for certain goods. Both sides continue to negotiate trade terms in specific sectors, such as fishing rights and agricultural exports.
5. World Trade Organization (WTO) Reform Talks:
The WTO has been under pressure to reform, especially in terms of dispute resolution and modernizing rules to address new global issues like digital trade, e-commerce, and environmental concerns. The WTO’s role in resolving trade conflicts is crucial, and many countries are pushing for reforms to address its growing inefficiencies.
6. US-Mexico-Canada Agreement (USMCA):
The USMCA replaced the North American Free Trade Agreement (NAFTA) in 2020. The agreement addresses changes in agriculture, labor rights, intellectual property, and digital trade. While it’s generally seen as beneficial for North American trade, it’s also been a subject of intense negotiation, particularly when it comes to specific industries like automobiles and dairy products.
7. India’s Trade Agreements:
India has been increasingly looking to forge trade agreements with other countries and regions. For instance, it entered into negotiations with Australia and the UAE for trade deals, and it’s been eyeing a larger agreement with the EU and the UK. At the same time, India has been cautious about opening up too much to foreign markets, particularly when it comes to agriculture and manufacturing.
