TRUMP REDUCES CHINA TARIFFS FROM 145% TO 30% IN GENEVA MEETING!

CALITODAY (May 12, 2025): On Monday, May 12, U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer officially announced the results of two days of weekend meetings—Saturday, May 10, and Sunday, May 11—with a delegation from Beijing led by Vice Premier He Lifeng in Geneva, Switzerland, to negotiate tariff reductions between the United States and China.The Washington Post

President Donald Trump had imposed a 145% tariff on all goods imported from China into the United States. In retaliation, China imposed a 125% tariff on U.S. goods entering China. Trump claimed victory over China and the world in this trade war, asserting that in recent days, Xi Jinping had contacted him for negotiations. However, China's Ministry of Foreign Affairs confirmed that no Chinese officials had met with the U.S. regarding tariffs.

Realizing that China was not willing to de-escalate, on Friday, May 9, Trump proposed reducing tariffs from 145% to 80% and delegated the decision to Treasury Secretary Scott Bessent. When interviewed by the U.S. press about any matter, Trump responded, "I don't know!"

The U.S. delegation, led by Scott Bessent, after two days of meetings with China, resulted in Trump agreeing to lower tariffs from 145% to just 30% on Chinese goods imported into the United States. China, in turn, imposed a 10% tariff on U.S. goods entering China. These tariffs are temporary for 90 days, after which both sides will reassess.

Stock markets surged after the U.S. and China agreed to reduce tariffs for 90 days.NPR+3markets.businessinsider.com+3Reuters+3

Treasury Secretary Scott Bessent stated at a press conference in Geneva that discussions with China were "robust," with both sides showing "great respect."

Wall Street opened higher on Monday following the U.S. and China's announcement of a 90-day tariff reduction agreement after trade talks in Switzerland.NPR

• S&P 500: up 2.6% to approximately 5,800 points
• Dow Jones Industrial Average: up 2.5% to approximately 42,270 points
• Nasdaq 100: up 3.5% to 18,550 points

The dollar index surged in response, while U.S. crude oil futures rose over 3%, exceeding $63 per barrel.

John Canavan of Oxford Economics noted in a memo that the easing had removed "some risks to the global economy."

Technology stocks saw significant gains in morning trading, with Nvidia up over 4%, Meta up 5.3%, and Tesla up 5.8%.

Asian stocks also ended Monday's trading session higher.

• Hong Kong's Hang Seng: up 3% to 23,549 points
• Shanghai's CSI 300: up 1.2% to 3,890 points
• Tokyo's Nikkei 225: up 0.4% to 37,644 points
• Seoul's Kospi: up 1.2% to 2,607 points
• Spot gold: down approximately 3.3% to $3,217.30 an ounce
• Dollar/Yen: up 2% to 148.24
• Dollar/Swiss Franc: up 1.7% to 0.8455

Analysts at Deutsche Bank stated that Monday's developments were much better than they had anticipated.

"In our view, this announcement not only exceeded our expectations but also surpassed what the market anticipated in March," they wrote in a note.

Zhiwei Zhang, chief economist at Hong Kong-based Pinpoint Asset Management, shared a similar perspective.

Chinese Vice Premier He Lifeng noted "significant progress," calling the negotiations a "crucial first step."NPR+3Reuters+3BBC+3

Bessent told CNBC's "Squawk Box" that he might meet with China in "the coming weeks" to begin working on "a more comprehensive agreement." "What we have with China is a mechanism to avoid pressure from increasing tariffs," he added.

Bessent stated that this agreement is a "good starting point" for the U.S. and China to negotiate on various issues, including trade.The White House+1New York Post+1

"From China's perspective, the outcome of this meeting is a success, as China maintained a firm stance against the U.S.'s high tariff threats and ultimately achieved a significant tariff reduction without concessions," Zhang wrote in a note, adding that the growth prospects of both economies have brightened.

Bessent mentioned at Monday's press conference that neither side wants to decouple: "We want trade. We want more balanced trade."

'Ceilings and Floors' on Tariffs

"Currently, we have both a ceiling and a floor on U.S. tariffs," George Saravelos, global head of FX research at Deutsche Bank, wrote in a note.

"The UK has one of the least imbalanced relationships with the U.S. and now has a general tariff rate of 10%," he said. "China has one of the most imbalanced relationships and now has a tariff rate of 30%."

"It makes sense that these two numbers now set the boundaries for where U.S. tariffs will end up this year, a significant increase in visibility compared to last week," Saravelos wrote.

Russ Mould, investment director at AJ Bell, warned that the agreement would only last for 90 days, "not eliminating new tariffs and still possibly coming with binding conditions."

According to AP, President Donald Trump's agreement with China to temporarily reduce tariffs for 90 days has provided the world with some relief. But uncertainty remains, and some damage from the trade war may have already occurred.

The Trump administration agreed after this weekend's negotiations in Switzerland to reduce tariffs on Chinese imports from 145% to 30%. The Chinese government chose to reduce retaliatory tariffs on U.S. goods from 125% to 10% while both sides continue negotiations.NPR+3markets.businessinsider.com+3The Verge+3

Trump declared the de-escalation of the trade war a victory, stating he would soon speak with Chinese President Xi Jinping about maintaining financial relations between the two largest economies.

Despite this, tariffs have remained high since Trump took office, and the combination of threats and olive branches from the White House may leave CEOs, investors, and consumers feeling uneasy and unwilling to take risks.

Trump will continue to impose tariffs. The global economy will not return to January 19, 2025, the day before Trump became president. Even as he frequently changes tariff levels, Trump and his aides have made it clear that most imports will be taxed at a minimum of about 10%.

The 10% figure is Trump's baseline. He has applied this tariff to most countries during the 90-day negotiation period after his "Liberation Day" tariff imposition on April 2 caused panic in financial markets. He maintained the 10% tariff as part of the framework with the United Kingdom announced last week. And Trump's new 30% tariff on Chinese goods includes 20% related to China's role in fentanyl and the 10% baseline applied elsewhere.

"We have many deals coming up," Trump said on Friday. "But we always have a baseline of 10%."

However, Trump also hinted that there could be exceptions. Industry-specific tariffs of 25% on cars, steel, and aluminum remain in place, with Trump emphasizing that pharmaceutical drugs will soon face import tariffs.

Trump said on Monday that he had told House Speaker Mike Johnson and Senate Majority Leader John Thune to include tariff revenue when considering how to pay for their planned income tax cuts.

Beware of the 'Bullwhip' Effect

If Trump's 145% tariff led to fewer ships leaving U.S. ports, the prospect of slightly lower tariffs could result in a flood of shipping containers crossing the ocean from China. The possibility of fewer ships from China had increased the risk of empty shelves in U.S. stores, a phenomenon most recently seen during the COVID-19 pandemic, leading to soaring prices and voter frustration.

But with the swift shift to lower tariffs, goods stored in warehouses and factories in Asia can now be quickly loaded onto cargo ships, causing shipping costs for those goods to spike and creating congestion at ports. Michael Starr, vice president of growth at logistics company Zencargo, said there would "certainly" be a bullwhip effect where current shortages turn into a new wave of supply as companies try to beat the prospect of higher tariffs returning.

"Now they can start shipping for the holiday season," Starr said. "They will quickly move as many orders as possible during these 90 days. And yes, ships can't return to operation as quickly as goods."

University of Michigan economist Justin Wolfers emphasized that many would view the 90-day negotiations as a short-term positive move because "moving tariffs from prohibitive and crazy to very high is good news."

HANH DUONG