Trump hails ‘total reset’ with China as trade tariffs slashed
The US and China have agreed to slash trade tariffs on each other, a move Donald Trump has said was part of a “total reset” in relations.
The president said the 90-day truce followed “very friendly” talks between the two sides in Switzerland over the weekend and those discussions would continue..
“China was being hurt very badly. They were closing up factories they were having a lot of unrest and they were very happy to do something with us”, he told reporters at the White House.
The breakthrough was announced early on Monday – to the delight of fincial markets – by the leader of the US delegation, treasury secretary Scott Bessent.
US trade representative Jamieson Greer confirmed so-called reciprocal tariffs were now at 10% each.
In real terms, it meant the US is reducing its 145% tariff to 30% on Chinese goods. A tariff of 20% had been implemented on China when President Donald Trump took office, over what his administration said was a failure to stop illegal drugs entering the US.
China has agreed to reduce its 125% retaliatory tariffs to 10% on US goods.
Sector-specific tariffs, such as the 25% tax on cars, aluminium and steel, remain in place.
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Tariffs, taxes on imports of more than 100%, had been imposed on both sides. China was the only country exempt from a 90-day pause on the “retaliatory” tariffs above the base 10% levies applied by America.
Major retailers had been warning Mr Trump of empty shelves as US importers pause shipments.
Mr Bessent said after a weekend of negotiations in Switzerland, the countries had a mechanism for continued talks.
It’s the second major trade announcement made by the US in the last week, after a deal was secured with the UK on Thursday.
The move signals a willingness from the Americans to make deals on tariffs.
Why Trump blinked in US-China trade war
Of all the fronts in Donald Trump’s trade war, none was as dramatic and economically threatening as the sky-high tariffs he imposed on China.
There are a couple of reasons: first, because China is and was the single biggest importer of goods into the US and, second, because of the sheer height of the tariffs imposed by the White House in recent months.
In short, tariffs of over 100% were tantamount to a total embargo on goods coming from the United States’ main trading partner.
That would have had enormous economic implications, not just for the US but every other country around the world (these are the world’s biggest and second-biggest economies, after all).
So the truce announced on Monday by treasury secretary Scott Bessent is undoubtedly a very big deal indeed.
Welcomed news
The news was received positively by Asian stock markets on Monday as major indexes were up.
In China, the Shanghai Composite stock index rose 0.8%, the Shenzhen Component gained 1.7%, and Hong Kong’s Hang Seng index was up nearly 3%.
In countries across Asia, benchmark stock indexes also rose. Korea’s Kospi grew 1.1%, Japan’s Nikkei was up 0.8%, while India’s Nifty 50 index of most valuable companies gained more than 3%.
US stocks rose sharply at the open.
The S&P 500 and tech-heavy Nasdaq saw their biggest leaps in more than a month, rising almost 3% and 4% respectively.
The market rally was visible in Europe too.
The dollar – hit in recent weeks by US recession speculation – was up more than a cent versus the pound while oil prices also rallied. Brent crude, the international benchmark, was 3.5% higher at $66 a barrel.
What next?
When asked by journalists about what the US wanted to see from China in the 90s, Mr Bessent said, “As long as there is good faith effort, engagement and constructive dialogue, then we will keep moving forward.”
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Explained: The US-UK trade deal
The UK came to the front of the line for deals, Mr Bessent added, “as our oldest ally”.
Switzerland had also moved to the “front of the queue”, he said, while the EU has been slower.
As with the other counties subject to 90-day pauses, a permanent deal will need to be reached, but confidence across the world is likely to have been boosted.
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Businesses now need a clear timetable and roadmap for future negotiations under the newly announced economic and trade consultation mechanism, said Andrew Wilson, the deputy secretary general of the International Chamber of Commerce.
“The credibility of that process for resolving underlying frictions in the Sino-US economic relationship will be mission-critical in terms of restoring business confidence.”
Donald Trump has revealed that media mogul Rupert Murdoch and his son Lachlan could be part of a deal in which TikTok in the United States will come under American control.
The US president also namedropped Michael Dell, the founder and CEO of Dell Technologies, as a possible participant in the deal during an interview with Fox News, which is owned by the Murdochs.
“I think they’re going to be in the group. A couple of others. Really great people, very prominent people,” Mr Trump said. “And they’re also American patriots, you know, they love this country. I think they’re going to do a really good job.”
Mr Trump said that Larry Ellison, founder and CEO of software firm Oracle, was part of the same group. His involvement in the potential TikTok deal had previously been revealed.
President Donald Trump speaking to reporters outside the White House. Pic: AP/Mark Schiefelbein
White House press secretary Karoline Leavitt said on Saturday that Oracle would be responsible for the app’s data and security, with Americans set to control six of the seven seats for a planned TikTok board.
This comes after Mr Trump said he and China’s Xi Jinping held a “very productive call” on Friday, discussing the final approval for the TikTok deal, much of which is still unknown.
Once confirmed, the deal should stop TikTok from being banned in the US after lawmakers decided it posed a security risk to citizens’ data.
Officials warned that the algorithm TikTok uses is vulnerable to manipulation by Chinese authorities, who can use it to push specific content on the social media platform in a way that is difficult to detect.
Congress had ordered the app shut down for American users by January 2025 if its Chinese owner ByteDance didn’t sell its assets in the country – but the ban has been delayed four times by President Trump.
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Mr Trump said on Sunday that he might be “a little prejudiced” about TikTok, after telling reporters on Friday: “I wasn’t a fan of TikTok and then I got to use it and then I became a fan and it helped me win an election in a landslide.”
After the call with Mr Xi, Mr Trump said in a Truth Social post: “We made progress on many very important issues, including Trade, Fentanyl, the need to bring the War between Russia and Ukraine to an end, and the approval of the TikTok Deal.”
Mr Trump later told reporters at the White House that Xi had approved the deal, but said it still needed to be signed.
Representatives for the Murdochs, Mr Dell and Mr Ellison have not yet commented on a potential TikTok deal.
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