U.S. and China Agree to Lower Tariffs for 90 Days

In a positive step forward, U.S. and Chinese officials agreed to lower reciprocal tariffs to 10% for 90 days beginning Wednesday as officials work out a broader trade agreement. The U.S., however, will keep a 20% fentanyl-related levy in place on Chinese imports, meaning the total tariff rate on goods from China now stands at 30%. Recall, prior to this weekend’s negotiations, the Trump administration had imposed tariffs of 145% on goods from China, with Beijing responding in kind with its own 125% tariff on U.S. exports to China.

China is the U.S.’s third-largest trading partner, accounting for about 12% of total trade. In 2024, U.S. goods exports to China totaled $144 billion, about a 2.9% decline from the year prior, while imports from China totaled $439 billion, about a 2.8% increase from 2023.

The latest negotiations come on the heels of a trade deal announced with the U.K. last week. Recall, on Thursday President Trump announced a trade framework with the U.K., marking the first agreement made since the White House implemented a series of tariffs last month. According to reports, the White House will lower the 25% tariff to 10% on autos and auto parts for the first 100,000 cars from the U.K. entering the U.S. Additionally, the 25% levy on steel and aluminum will be replaced with a “alternative agreement” negotiated by the U.S. and the U.K. However, a 10% baseline tariff on all imports into the U.S. will remain in place.

Meanwhile, the U.K. has agreed to eliminate its tariff on ethanol, which is largely used for biofuel and in the production of beer and will grant a tariff-free quota for 13,000 metric tons of U.S. beef.

The U.S. had a trade surplus with the U.K., totaling $11.9b in 2024, up from the $10.1b surplus posted the year prior.

Following the news of suspended tariffs with China, equities are trading higher with the S&P 500 up 2.6% at 5,805.19, while the 10-year UST yield is up 7bps at 4.45% as of 9:55 a.m. ET.

-Stifel Economics