The US and China have agreed to reduce their tariffs for 90 days, in what President Donald Trump described as a “reset” in the relationship between the two superpowers.
Sparked by Trump, both countries had engaged in a tit-for-tat escalation of tariffs on each other, sending global stock markets into free-fall.
American and Chinese officials have now struck a deal to reduce tariffs, following talks in Switzerland over the weekend.
Here’s what you need to know.
Tariffs
A ‘tariff’ is a tax on imports. It’s applied to foreign-made goods brought into another country, and paid by the importer.
Trump has said tariffs help equalise what he’s called “unfair” trade arrangements between the US and its global trading partners, including China.
He’s also argued tariffs are a way to boost domestic manufacturing and production, rather than relying on international trade.
The escalation
On 2 April, Trump announced a raft of tariffs against all countries.
He started out by imposing a 34% tariff on China, which Beijing reciprocated.
Tit-for-tat tariffs escalated until the US had reached a 145% tax on Chinese goods, and China had imposed a 125% levy on American imports.
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Commentators called it a “trade war”.
Pause
Senior trade authorities from the US and China met for talks in Geneva, Switzerland, over the weekend.
As a result, both parties are taking 115% off each other’s tariffs for 90 days.
That means the US tariffs on China’s imports will drop from 145 to 30%.
Similarly, China’s tariffs on US goods will decline from 125 to 10%.
Negotiations will continue within those 90 days, with both countries expected to review future trade deals.
Response
Trump said the relationship with China can now “reset”, announcing that he would speak directly with his counterpart, President Xi Jinping, later this week.
“We’re not looking to hurt China,” Trump told reporters.
China’s Vice Premier He Lifeng said the meeting was an “important first step” in improving the relationship.
The top 500 companies on Wall Street increased in value by 3.3% on the first day of trading after the tariff pause.
