The BBC saysBeijing and Washington issued a joint statement earlier today saying that both parties will suspend 24 percent of the current tariffs they have applied to their counterpart. This means that tariffs on Chinese goods arriving in the U.S. will drop to 30%, while China will reduce the duty rate on American products arriving at its ports to 10%. Although the 30% tax is high amount for import taxes, it’s still a bigger reduction than most experts anticipated.
The trade war escalation between the two nations started when President Trump imposed tariffs on every nation on earth in early April. This bumped the tariffs on Chinese goods from 20% to 54%, which Beijing answered with a 34% tariff on U.S. goods entering the country. Trump did not like this, as he was hoping that Beijing would negotiate instead of firing back with its own set of taxes, so he bumped up his tariffs to 104%.
China responded by matching the 50% increase, which pushed import taxes on U.S. goods to 84%. Trump soon paused his tariffs on nearly all countries, reducing the rates to just 10% — except for Chinese goods. Because the country pushed back against Washington, the duty rate soared to a total of 145%. Beijing then put a 125% import duty on American items, effectively freezing trade between the two largest economies.
Both countries applied a few exceptions, especially on goods that neither of them can get elsewhere quickly. For example, computers, smartphones, and several other tech products were given reprieve from U.S. import taxes, while China reportedly waived tariffs on chips from America.
Nevertheless, both countries are being hurt by these actions, with some U.S. ports reporting a nearly 50% reduction in international freight traffic. Thankfully, China and the US started trade talks in Geneva, Switzerland, last Saturday, May 10, after weeks of escalations. By early Monday, the rivals had come to an agreement saying that they would drastically reduce the tariffs they placed on each other for 90 days.
The U.S. will reduce its duties on Chinese goods to 30%, which is broken down into the 10% “standard” tariff that Trump applied on almost all imports arriving on U.S. shores, plus the 20% tariff he put on China because it hasn’t effectively reduced the inflow of precursor chemicals for Fentanyl. On the other hand, Beijing matched this move with a 10% import tax.
This will hopefully allow trade between the two powers to resume once again. We do not expect the prices of many goods that rely on Chinese imports to return to pre-tariff rates, though. But, at least, the higher cost would not be as egregious, like this massive $255k tariff bill Wyze received for $167k worth of floodlights.
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