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US, China Agree to 90-day Pause on Tariffs

[ May 21, 2025   //   Gary Burrows ]

‘Liberation Day’ for many U.S. consumers and global traders came on May 14, not April 2, which was the day when President Donald Trump essentially set an embargo against Xi Jinping and China, and prohibitive tariffs against every country. And some penguins.

Instead, On May 12, Trump issued a joint statement with China, having negotiated a 90-day pause, halting reciprocal tariffs – which brought some rates as high as 145 percent against China and as high as 125 percent against the U.S.

Instead, the two countries left a 10 percent tariff against one another during the 90-day pause, and the U.S. will also assess a 20 percent charge against China related to fentanyl trade.

The U.S. and China agreed to establish a mechanism to continue discussions on economic and trade relations. Negotiating on behalf of the U.S. are Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer.

Xi Out Deals Trump

Running for re-election, Trump boasted himself as a dealmaker that would end inflation, the war in Ukraine and the Red Sea issue each in a day. However, critics point out that Trump surrendered his stance and Xi walked away without ceding any ground.

Trump claimed the tariffs would stimulate the U.S. economy, bring back manufacturing jobs, raise tax revenue and provide the U.S. with some leverage in negotiating with allies.

Economists have broadly and repeatedly warned the tariffs will slow the global economy, create trade wars with friends and enemies, gut markets, raise prices and potentially bring a recession. Trump, without evidence or specific argument, tells voters to believe what he’s telling them and not what they’re seeing for themselves.

What they saw was the stock market take a historic nosedive, shippers and logistics providers stuffing cargo into the supply chain to beat the tariffs, then practically switching it off.

A recent ABC News/Washington Post/Ipsos poll found more than 7 in 10 Americans believe the economy is in bad shape, see Trump’s tariffs as a negative factor in price inflation, and think it’s very or somewhat likely that his economic policies will lead to a recession in the short term.

The accord does not include the “de minimis” exemptions for low-value e-commerce shipments from China and Hong Kong, which the Trump administration terminated on May 2, according to a source familiar with the negotiations. The duties are also still higher than before Trump announced a raft of tariffs on April 2.

‘China-plus-one’

The new U.S. China agreement is pressuring manufacturing hubs such as Vietnam and Mexico to make their own, better deals with the U.S. to continue benefiting from a “China-plus-one” strategy by global producers, Reuters said.

For the previous five weeks, many nations facing significant duties under Trump’s now-paused “reciprocal” global tariff regime announced on April 2 at least had better rates than China. Compared to 145 percent, Vietnam had a 46 percent rate, Thailand was 36 percent and Malaysia 24 percent.

Given their comparative advantage, manufacturing hubs anticipated further moves by multinational corporations to set up shop in their countries and decrease their dependency on China, potentially adding to a years-long trend known as “China-plus-one.” Instead, Trump’s retreat may slow the momentum that was urging multinationals to shift their supply chains outside of China.

Bessent said May 12 that the trade agreement reached over the previous weekend represents progress in “strategic decoupling” from China, CNBC reported.

Bessent said there are specific elements of decoupling in place that are vital to U.S. interests. The U.S. imported nearly US$440 billion in goods from China in 2024, running a US$295.4 billion trade deficit.

“But what we do want is a decoupling for strategic necessities, which we were unable to obtain during Covid and we realized that efficient supply chains were not resilient supply chains,” Bessent said in an interview on CNBC’s “Squawk Box” (https://www.cnbc.com/squawk-box-us/).

Consequently, during the pandemic, U.S. demand shifted from service-focused to a goods focus, which led to scarcity of multiple products including big-ticket retail. What followed was the worst global inflation surge in more than 40 years for the U.S.