Summary
- US President Donald Trump says the US has achieved a “total reset” in relations with China after both countries agreed to reduce tariffs on each other’s goods for 90 days
- US markets have surged after the deal between Washington and Beijing, a major de-escalation in their trade war
- Markets in the US are now trading at similar levels to the beginning of the year, our New York business reporter Natalie Sherman writes – marking a significant recovery since Trump announced his “Liberation Day” tariffs in April
- US tariffs on Chinese imports will fall from 145% to 30%, while Chinese tariffs on US goods will fall from 125% to 10%
- It is a bigger cut than expected, writes our correspondent Theo Leggett – but 30% is still a high tariff
Stocks jumping for companies with Chinese imports
Bob Doll, chief executive of Crossmark Global Investment, has been speaking to Michelle Fleury on Opening Bell about the stock market, where shares in companies that bring in goods from China are, unsurprisingly, surging.
Shares in Target, for example, have jumped more than 5%, while Nike is up more than 8%.
Oil prices and the dollar have risen too.
Despite the optimism on Wall Street this morning, Doll says the announcement does not completely clear up economic risks.
Businesses and households have had their confidence shaken, and the rise in tariff rates remains significant. Even the reduced 30% tariff rate could drive exports from China to the US down by more than a third, according to Macquarie Bank.
“From Liberation Day to now, uncertainty levels have moved up a lot and getting through that is not going to be simple,” Doll says. “My guess is, it’s not going to be a straight line up.”
Trump says he will ‘equalise’ drug prices between US and world
In addition to speaking on the tariff pause with China, Trump has been laying out his plans to reduce US drug prices and bring them in line with the rest of the world.
After explaining the vast differences in pharmaceutical prices that US patients pay compared to their counterparts in the UK, EU and other developed countries, he says “what we’re doing is equalising”.
He adds: “We’re all going to pay the same, we’re going to pay what Europe is going to pay.”
Trump also claims the US is going to pay the lowest price in the world, so “we’re no longer paying 10 times more than another country.”
US-China relations are ‘very good’ – Trumppublished at 16:1616:16
We can bring you a bit more now on Trump’s initial comments at the White House. He describes the relationship between the US and China as “very good”.
“We’re not looking to hurt China,” he says, adding that China was “being hurt very badly”.
“They were closing up factories. They were having a lot of unrest, and they were very happy to be able to do something with us.”
Trump goes on to say that his administration made a “great trade deal” with China, which was “a much bigger deal originally, and then they cancelled it right on the last day.”
As a reminder, the US will still apply a 30% tariff on Chinese goods during the 90-day pause agreed to by the two countries. US goods face a 10% tariff in China.
Trump says China has agreed to stop sending fentanyl to US
Trump says he’s charging China a 20% tariff rate “for the fact that they send fentanyl” into the US.
“And they’ve agreed they’re going to stop that,” Trump says.
He adds that “they’ll be rewarded by not having to pay … hundreds of billions of dollars in tariffs.”
China is the primary source of the precursor chemicals used to produce fentanyl, which killed over 74,000 Americans in 2023 after taking drug mixtures containing fentanyl, according to the US Centers for Disease Control (CDC), external.
Trump says ‘total reset’ reached with China after escalating trade war
Trump says his administration has achieved a “total reset with China” with the latest agreement, after weeks of an escalating trade war.
“The best part of the deal”, Trump adds, is that “China agreed to open itself up to American business”.
Trump adds the US has “opened” itself to Chinese imports but that “they didn’t open their country to us”.
“It never made sense to me. It’s not fair,” Trump says.
He also says China will “suspend and remove all of its non-monetary [trade] barriers”, but says that the deal still needs to be signed.
Trump says he will speak to Xi Jinping ‘maybe at the end of the week’
US President Donald Trump is now speaking at the White House.
Commenting on further negotiations related to the tariff agreement with China, Trump says he will speak to Chinese President Xi Jinping “maybe at the end of the week”.
We’ll bring you the key lines in our next few posts – you can also follow along by clicking Watch live at the top of the page.
Tariffs? What tariffs?
The stock market in the US is soaring this morning, a reflection of the outcome of US-China trade talks over the weekend, which yielded a much more significant drop in tariffs than many analysts had expected.
The S&P 500 is up roughly 2.6%, the Dow by about 2.5% and the Nasdaq by more than 3.3%.
The market had already recovered significant ground since 2 April, when Trump’s “Liberation Day” tariffs sparked turmoil.
In the US, the stock indexes are now trading at levels close to where they started the year.
US markets surge following US-China agreement
The bell has sounded on Wall Street and trading in the world’s biggest economy is now open.
Here’s where the three main indexes are on opening:
- S&P 500 – up 2.6%
- Nasdaq – up 3.3%
- Dow Jones – up 2.5%
Chinese companies expect more tariff changes
Companies in China are preparing for more tariffs down the line, despite the 90-day pause announced earlier today.
“To be honest, many Chinese companies no longer believe that tariffs will remain unchanged. For businesses, the best they can do is build a moat around their company before the next round of tariffs arrives,” said Elaine Li, head of Greater China at Atlas Ways, which offers services for Chinese enterprises’ global development.
Elaine Li told BBC Chinese that for many Chinese exporters, the latest tariff reductions are only temporary.
The rapid changes in tariffs led them to a more diversified global strategy, and they have already moved from getting orders passively to exploring international markets proactively. “It’s hard to wake someone who’s pretending to sleep, but it’s even harder to put someone to sleep when has just awakened.”
Uncertainty remains, says EU Chamber of Commerce in China
Reacting to the 90-day pause in US-China tariffs, the European Chamber of Commerce in China says while it’s “encouraged by the decision, uncertainty remains”.
“This is partly because certain tariffs have only been suspended for 90 days, and partly because of the erratic nature in which these tariffs were implemented in the first place,” it says in a statement.
It says it hopes to see both sides continue to engage in dialogue to “resolve differences, and avoid taking measures that will disrupt global trade and result in collateral damage for those caught in the cross-fire”.
‘Trump caves on China’, says Democratic lawmaker
California congressman Eric Swalwell, a Democrat, welcomed the Trump administration’s US-China trade agreement but still snuck in a diss.
“Just like I TOLD YOU. Trump caves on China,” Swalwell wrote on X, re-posting a previous post of his from April that said “Trump will cave on tariffs”.
He attributed the temporary reduction in tariffs to pressure from Democrats, without going into detail.
“Thank you! YOU went to the town halls and town squares. WE did this,” he says.
Earlier, US Treasury Secretary Scott Bessent announced that both China and the US would lower their reciprocal tariffs by 115 percentage points for 90 days from 14 May, after the two countries held talks in Switzerland at the weekend.
US stock markets to open shortly
In just under an hour, US stock markets will open, and our business editor Simon Jack says the S&P 500 is expected to open above the level it was the day before Trump’s “Liberation Day”.
As we reported earlier, global stock markets have welcomed news of the agreement between the US and China to pause tariffs for 90 days.
Hong Kong’s benchmark Hang Seng Index was still trading when the announcement was made, and jumped on the news, ending the day up 3%.
European stock markets also saw a boost following the announcement.
We’ll bring you the latest once trading in the US is under way.
Chinese exporter welcomes ‘pleasant surprise’ of US-China deal
“I’m glad sanity is back in style,” says Tat Kei, a Chinese exporter of personal care appliances to the US, whose factory employs 200 people in Shenzhen.
However, with the US still placing a 30% import tax on items arriving from China, he says prices will still rise for US customers, despite the tariffs truce.
Tat Kei’s still looking to move some production to south-east Asia.
“President Trump is going to be here for the next 3.5 years. I don’t think this is going to be the end of it…not by a long shot,” he says.
Tat Kei earlier spoke to the BBC World Service’s Business Dailyprogramme when the US and China were still engaging in tit-for-tat tariffs and most US-bound orders at his factories were cancelled.
White House says deal is ‘an extraordinary first step’
White House Press Secretary Karoline Leavitt tells Fox News that the latest US-China agreement on trade was “an extraordinary first step in the right direction”.
China also agreed to “continue having discussions” about further opening its market to US products and goods, Leavitt says, and to “continue seriously discussing the grave impact that Chinese produced fentanyl is having” in the US.
“President Trump will continue negotiations with China, so we can hopefully, inevitably get to a fair and comprehensive, big trade deal,” she adds.
US-China deal is full steam ahead for shipping companies
This weekend’s trade agreement between the US and China is certainly good news for shipping companies.
Remember, about 90% of global trade is moved by sea. Everything from clothes and toys to furniture and cars.
The extraordinary tariffs had led to a collapse in the amount of goods being moved across the Pacific Ocean but investors sense that will rebound and that will mean more profits.
Just two of the world’s five biggest shipping companies are traded on stock markets.
And the direction of travel is clear, five hours into the European trading day Denmark’s Maersk is up more than 11.5% whilst Germany’s Hapag-Lloyd is up more than 13.5%.
Both companies have welcomed the agreement with Maersk earlier saying “we hope it can lay the foundation for the parties to also reach a permanent deal that can create the long-term predictability our customers need”.
Meanwhile Hapag-Lloyd says its now expecting an increase in bookings on sailings from China to the US and that might mean it uses larger ships than it had otherwise planned.
How did we get here?
For those of you not steeped in global trade policy, here’s a brief timeline of the events that led up to the 90-day pause in tariffs between the US and China:
- 1 February: US President Donald Trump announces a 10% tariff rate on almost all Chinese goods entering the US
- 4 February:China responds with various tariffs of 10-15% on certain US products
- 4 March: Trump doubles the tariff rate on Chinese goods to 20%
- 2 April:The US announces a further 34% tariff rate on Chinese imports, bringing the total to 54%. China responds with a 34% tariff on most US goods
- 9 April: China says it will impose 84% tariffs on US goods from 10 April, up from 34%. Trump’s “reciprocal” tariffs come into force, with China’s tariffs revised to 84% – bringing the total to 104%. Trump later says tariffs on China will go up to 125%, which brings the total including the levy from February up to 145%
- 11 April: Beijing increases its tariffs on goods from the US up to 125% and says it won’t respond to further increases
- 12 May: The US and China announce a 90-day pause on “reciprocal” tariffs starting 14 May after holding trade talks in Switzerland. It will bring US tariffs on Chinese imports down from 145% to 30%, and Chinese tariffs on US goods will fall from 125% to 10%
What could the tariff deal mean for TikTok?
You may recall a law last year ordering TikTok’s Chinese parent company ByteDance to sell the app or see it banned in the US.
Since then President Trump has extended the deadline twice to June 2025, leaving everyone wondering what is actually going on.
The Chinese government would likely need to approve such a sale – which means it’s inevitable such a big sticking point between the US and China might have gotten muddled up in the trade talks.
Trump told NBC News in May there were people ready to buy the app – but his tariffs had limited China’s ability to do business with the US.
He said he believed TikTok would be a “very easy subject to solve” in a tariff deal.
So a 90 day pause on tariffs – and pledges to continue trade discussions – may help secure a TikTok sale.
US-China deal leaves Beijing ‘psychologically stronger’, says analyst
Despite the US and China calling this a joint agreement, people in Beijing will interpret it as the Trump administration walking back from the tariffs, says Janka Oertel, director of the Asia programme at the European Council on Foreign Relations.
“We are back to square one, now negotiating can begin. The outcome is uncertain but China is in a psychologically stronger position now than before,” Oertel says.
However, Oertel says “it’s not really a deal yet” without seeing details on fresh commitments from Beijing on key issues like market access or expanded imports of US goods.
What does this truce suggest about the future strategy of US tariffs?
That’s a question many will be pondering this morning as everyone digests the truce announcement between the world’s two biggest economies.
Economists at Deutsche Bank have suggested the lowering of tariffs, and last week’s UK-US deal on them, means there’s both “a likely cap and floor” to Trump’s rates of 10 to 30%.
“The UK has one of the least imbalanced relationships with the US and now has a universal tariff rate of 10%. China has one of the most imbalanced relationships and now has a tariff rate of 30,” says George Saravelos, head of FX research at the investment bank.
“It is reasonable that these two numbers now set the bounds of where American tariffs will end up this year, a material increase in visibility from just last week.”