US and China agree on significant 90-day reciprocal tariff cuts

On Monday, May 12, the United States and China announced an agreement to temporarily reduce mutual tariffs. The world's two largest economies are seeking to end a trade confrontation that has weighed on global economic prospects and put financial markets under severe pressure.

The tariff dispute has disrupted about $600 billion in bilateral trade, straining supply chains and raising stagflation risks.

US Treasury Secretary Scott Bessent stated that both sides agreed to a 90-day suspension of new tariffs and expressed commitment to balanced trade. The duties will be cut by more than 115 percentage points on both sides. China's duties on American goods are set to fall from 125% to 10%. The 125% retaliatory US tariffs on Chinese imports will also drop to 10%.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, expected a tariff cut of up to 50% and pointed out that the actual result was much better. This is a great development for both economies and global markets. Zhang also cautioned that the deal is only a three-month pause, signaling the start of a lengthy normalization process.