China and U.S. Agree to 90-day tariff truce amid escalating trade tensions

China and U.S. Agree to 90-Day Tariff Truce Amid Escalating Trade Tensions

May 12, 2025 – In a significant breakthrough following months of escalating trade tensions, China and the United States have agreed to a 90-day suspension of additional tariffs, sparking a sharp rally in global financial markets.

The agreement, reached earlier this month during high-level trade talks, aims to de-escalate the tariff war that has strained economic relations between the world’s two largest economies since the beginning of the year. Both sides will substantially roll back tariffs on key imports during the reprieve period, providing temporary relief to businesses and investors alike.

The truce comes after weeks of tit-for-tat tariff exchanges that rattled global markets and raised fears of a full-scale trade war. The temporary easing has been welcomed by investors, with stock markets surging in response to the announcement.

For China, the stakes are particularly high. The country is already grappling with mounting economic pressures, including a downturn in the housing market, weakening labor conditions, deflationary trends, and sluggish consumer and business confidence. In anticipation of prolonged trade turbulence, Beijing recently introduced a new round of economic stimulus to bolster domestic consumption.

Despite the recent agreement, economic forecasts remain subdued. Analysts have downgraded China’s real GDP growth expectations for 2025 to 4.3%, while inflation projections continue to soften.

While the 90-day reprieve offers a window for renewed negotiations and potential resolution, analysts warn that underlying tensions remain unresolved. The coming months will be critical in determining whether this truce can pave the way for a lasting trade settlement.