U.S. and China Agree to Temporarily Slash Tariffs Effective May 12, 2025, in Bid to Defuse Trade War

Washington, D.C. and Beijing — May 12, 2025 — In a surprise breakthrough that could mark a turning point in years of strained economic relations, the United States and China have agreed to temporarily reduce a wide range of tariffs starting today, May 12, 2025. The move, jointly announced by officials from both governments, is intended to de-escalate tensions that have flared in recent months amid rising global economic uncertainty.

The agreement, dubbed the “Tariff Truce Pact,” involves a mutual 50% reduction in tariffs on hundreds of billions of dollars’ worth of goods, including electronics, automobiles, agricultural products, and industrial machinery. The tariff rollbacks are set to remain in effect for a provisional period of six months, during which both nations will engage in a new round of high-level trade negotiations.

“This is a crucial step toward stabilizing global trade and rebuilding trust between our two nations,” said U.S. Trade Representative Katherine Tai during a press conference Monday morning. “While many challenges remain, we believe this agreement creates space for constructive dialogue and tangible progress.”

Chinese Vice Premier Liu He echoed the sentiment, stating in Beijing, “This temporary arrangement reflects a mutual understanding that confrontation must give way to cooperation. The global economy cannot afford prolonged hostility between the world’s two largest economies.”

A Fragile Thaw

The tariff rollback comes after a turbulent period marked by tit-for-tat escalations. In early 2025, the U.S. had raised tariffs on $200 billion worth of Chinese goods in response to what it claimed were “unfair trade practices and intellectual property violations.” China quickly retaliated with levies on U.S. agricultural exports and critical components, prompting concern from global markets and international partners.

Analysts say the sharp drop in trade volumes and the resulting inflationary pressures in both countries created growing internal political pressure to strike a compromise.

“The fact that both sides agreed to step back from the brink reflects mounting economic realities,” said Maria Tanaka, a senior economist at the Peterson Institute for International Economics. “While this is a temporary measure, it could build momentum toward a more lasting resolution—provided trust continues to build.”

Key Provisions

Under the terms of the deal:

• The U.S. will reduce tariffs on major Chinese imports, including consumer electronics, textiles, and rare earth metals.
• China will reduce tariffs on key U.S. exports such as soybeans, corn, semiconductors, and energy products.
• A bilateral trade commission will be formed to monitor progress and ensure compliance.
• Both parties will pause any new tariff actions during the six-month window.

Additionally, the agreement includes language committing both nations to further talks on broader economic reforms and digital trade rules.

Business Reaction

Markets reacted positively to the news. The Dow Jones Industrial Average opened up over 500 points, and shares of multinational manufacturers and agricultural companies surged. In Shanghai, the SSE Composite Index rose by more than 2% amid renewed investor optimism.

“We applaud the move,” said Michelle Grant, spokesperson for the U.S. Chamber of Commerce. “American businesses have long borne the brunt of tariff uncertainty. This gives companies room to breathe and invest again.”

Chinese exporters also welcomed the news, with the China Council for the Promotion of International Trade issuing a statement urging both sides to “seize this opportunity for long-term cooperation.”

Next Steps

While the agreement represents progress, experts caution that it is only a temporary fix. Core issues—such as technology transfer, industrial subsidies, and data security—remain unresolved.

“The truce is promising but fragile,” said James Rothman, a trade law professor at Georgetown University. “If deeper structural issues aren’t addressed during the negotiation window, we could see tariffs snap back into place—and possibly worse.”

As negotiators prepare for their next meeting in Geneva next month, global observers will be watching closely. For now, however, the tariff pause provides a welcome reprieve in a complex and high-stakes geopolitical standoff.

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The core themes revolve around de-escalation, the economic pressures driving the agreement, the specifics of the pact, and the fragile nature of this progress.

Most Important Ideas/Facts:

• Temporary Tariff Reduction Agreement: The central fact is the agreement reached by the U.S. and China to temporarily reduce tariffs on “hundreds of billions of dollars’ worth of goods” by 50%, effective May 12, 2025.
• De-escalation of Trade War: The primary stated purpose of the agreement, dubbed the “Tariff Truce Pact,” is to “de-escalate tensions that have flared in recent months amid rising global economic uncertainty.”
• Six-Month Provisional Period: The tariff rollbacks are temporary, set to last for a provisional period of six months, during which “both nations will engage in a new round of high-level trade negotiations.”
• Driven by Economic Realities: Analysts suggest that the agreement was driven by “mounting economic realities,” specifically “the sharp drop in trade volumes and the resulting inflationary pressures in both countries [which] created growing internal political pressure to strike a compromise.”
• Mutual Reductions on Key Goods: The agreement involves reciprocal reductions on significant imports and exports for both countries.
• The U.S. will reduce tariffs on items including “consumer electronics, textiles, and rare earth metals.”
• China will reduce tariffs on goods such as “soybeans, corn, semiconductors, and energy products.”
• Pause on New Tariff Actions: Both parties have committed to “pause any new tariff actions during the six-month window.”
• Formation of a Bilateral Trade Commission: A commission will be established to “monitor progress and ensure compliance.”
• Commitment to Further Talks: The agreement includes a commitment to “further talks on broader economic reforms and digital trade rules.”
• Positive Market Reaction: Financial markets reacted positively, with the Dow Jones Industrial Average opening significantly higher and stock indices in both the U.S. and China seeing gains.
• Business Support: Business organizations in both countries, such as the U.S. Chamber of Commerce and the China Council for the Promotion of International Trade, welcomed the agreement, citing relief from tariff uncertainty.
• Fragile Progress, Core Issues Unresolved: Despite the positive steps, experts caution that the agreement is “only a temporary fix.” “Core issues—such as technology transfer, industrial subsidies, and data security—remain unresolved.”

Key Quotes:

• “This is a crucial step toward stabilizing global trade and rebuilding trust between our two nations. While many challenges remain, we believe this agreement creates space for constructive dialogue and tangible progress.” – U.S. Trade Representative Katherine Tai
• “This temporary arrangement reflects a mutual understanding that confrontation must give way to cooperation. The global economy cannot afford prolonged hostility between the world’s two largest economies.” – Chinese Vice Premier Liu He
• “The fact that both sides agreed to step back from the brink reflects mounting economic realities. While this is a temporary measure, it could build momentum toward a more lasting resolution—provided trust continues to build.” – Maria Tanaka, senior economist at the Peterson Institute for International Economics
• “We applaud the move. American businesses have long borne the brunt of tariff uncertainty. This gives companies room to breathe and invest again.” – Michelle Grant, spokesperson for the U.S. Chamber of Commerce
• “The truce is promising but fragile. If deeper structural issues aren’t addressed during the negotiation window, we could see tariffs snap back into place—and possibly worse.” – James Rothman, trade law professor at Georgetown University

Conclusion:

The agreement to temporarily slash tariffs between the U.S. and China represents a significant, albeit provisional, step toward de-escalating trade tensions. Driven by internal economic pressures, the “Tariff Truce Pact” aims to create space for further negotiations on broader economic issues. While welcomed by markets and businesses, the success of this temporary measure hinges on addressing the fundamental disagreements that fueled the trade war in the first place. The six-month window is crucial for determining whether this fragile thaw can lead to a more lasting resolution.

U.S. and China Tariff Truce Pact Study Guide

Quiz

1. What is the primary purpose of the temporary tariff reduction agreed upon by the U.S. and China?
2. When did the temporary tariff reduction agreement become effective?
3. What is the name given to the agreement between the U.S. and China to temporarily reduce tariffs?
4. For how long is the tariff reduction agreement initially set to remain in effect?
5. Who is the U.S. Trade Representative mentioned in the article?
6. Who is the Chinese Vice Premier mentioned in the article?
7. What was one reason cited by the U.S. for raising tariffs on Chinese goods in early 2025?
8. According to the article, what impact did rising trade volumes have on the economies of both countries?
9. What is one example of a Chinese import that the U.S. will reduce tariffs on under the agreement?
10. What is one example of a U.S. export that China will reduce tariffs on under the agreement?

Quiz Answer Key

1. The primary purpose is to de-escalate tensions that have flared in recent months amid rising global economic uncertainty.
2. The agreement became effective on May 12, 2025.
3. The agreement is dubbed the “Tariff Truce Pact.”
4. The tariff rollbacks are set to remain in effect for a provisional period of six months.
5. The U.S. Trade Representative mentioned is Katherine Tai.
6. The Chinese Vice Premier mentioned is Liu He.
7. One reason cited was what the U.S. claimed were “unfair trade practices and intellectual property violations.”
8. According to the article, the sharp drop in trade volumes contributed to inflationary pressures in both countries.
9. One example of a Chinese import is consumer electronics, textiles, or rare earth metals.
10. One example of a U.S. export is soybeans, corn, semiconductors, or energy products.

Essay Questions

1. Analyze the economic motivations for both the United States and China to agree to the temporary tariff reduction, considering both the negative impacts of the trade war and the potential benefits of de-escalation.
2. Evaluate the significance of the “Tariff Truce Pact” as a potential turning point in U.S.-China economic relations, discussing both its potential for building trust and its inherent fragility.
3. Discuss the reactions of the business community in both the U.S. and China to the tariff reduction agreement, explaining why different sectors might view this development positively.
4. Identify and explain the core structural issues in the U.S.-China economic relationship that are not directly addressed by the temporary tariff reduction, and discuss the challenges in resolving these issues.
5. Consider the role of international partners and the global economy in the U.S.-China trade dispute, and explain how the “Tariff Truce Pact” might impact global trade stability.

Glossary of Key Terms

• Tariff: A tax or duty to be paid on a particular class of imports or exports.
• Trade War: A situation in which countries try to damage each other’s trade, typically by the imposition of tariffs or quotas.
• De-escalate: To reduce the intensity of a conflict or situation.
• Provisional Period: A temporary period during which something is in effect before a more permanent arrangement is made.
• Bilateral Trade Commission: A group formed by two countries to oversee and discuss trade matters between them.
• Inflationary Pressures: Factors that cause prices to rise in an economy.
• Tit-for-tat Escalations: A series of retaliatory actions of a similar kind.
• Intellectual Property Violations: The unauthorized use of a person’s or company’s creations, such as inventions, designs, or artistic works.
• Structural Issues: Deep-seated or fundamental problems within a system or relationship.
• Digital Trade Rules: Regulations and agreements that govern trade conducted electronically, such as e-commerce and data flows.