In a surprising step, but it met globally, the United States and China have agreed to significantly reduce mutual customs duties, in what the officials of the two countries described as a “90 -day truce” aimed at providing an opportunity for broader trade negotiations.
The temporary agreement was announced today, Monday, in the Swiss city of Geneva, to constitute a dramatic decline in a commercial escalation that shook global markets and raised prices and raised a state of uncertainty in international trade.
According to the joint statement issued by the negotiators:
- Washington will reduce customs duties imposed on Chinese goods from 145% to 30%.
- Beijing will reduce the fees imposed on American goods from 125% to 10%.
- This agreement is scheduled to enter into force on May 14 for a period of 90 days as a start for broader negotiations.
US Treasury Secretary Scott Bessent said in an interview with “Bloomberg” that it is not a matter of complete separation, “We are strategically separating sectors that affect national security such as semiconductors, medicines and steel, but no one wants a general separation.”
The winners, losers and sudden recovery
The financial markets responded with an immediate and clear welcome, as:
- The Standard & Poor’s 500’s futures jumped by 3.1%.
- The NASDAC index increased by 3.6%.
- The Dow Jones Industrial Index rose 2.4%.
- European and Asian markets flourished.
- Hong Cong’s “Hong Kong” index has registered gains that have replaced all its losses since the “Tahrir Day” announced on April 2.
“Bloomberg” said that investors have returned strongly to stocks after calming the trade war that planted chaos in global markets, describing the agreement as “an ideal scenario.”
- Technology companies that depend on Chinese supply chains such as “Apple” and “Amazon” have made gains of 6.5% and 7.6%, respectively, according to Reuters.
- The shares of semiconductor companies such as “Invidia” increased by 4.5% and “Micron” by 6.6%.
in contrast:
- The shares of pharmaceutical companies recorded a decrease, not because of the commercial agreement, but as a result of Trump’s announcement of a plan to reduce medicine by up to 80%.
- Shares of companies such as “Pfizer” and “Elay Lily” fell by more than 2%, according to “Investment.com”.
The goods interact .. The oil jumps and gold is retreating
Oil prices saw a sharp leap in light of expectations of improving demand from the largest oil consumers globally. Brent crude prices rose by 3.3% to $ 66.03 a barrel, while West Texas Intermediate crude rose by 3.5% to $ 63.17.
Nigel Green, CEO of the “De Fair” – Bloomberg’s “Bloomberg” group – said this type of dilution of fees completely changes the investment scene “and gives companies space to reassess their future outlook.
On the other hand, the safe assets witnessed a significant decline, as gold fell by 2.5% to 3265 dollars per ounce, which is its largest daily decline in months.
James McCainteh of the Wall Street Journal explained that the sharp decline in gold reflects the return of confidence in the American dollar and increased the appetite for risk.
Currencies swing … the rise of the dollar and the yen fell
The currency markets have witnessed significant moves, as the dollar index jumped by 1.5%, which is its highest daily increase since the first Trump elections in 2016, according to “Financial Times”. The Chinese yuan also increased slightly, while the Japanese yen fell by 2%, and the Swiss franc by 1.3%.
Bouja Kumra, analyzed at TD, said that the markets “are now canceling all their bets on the safe assets that have prevailed since the liberation day.”
Inside the agreement .. what was agreed upon and what has been ignored
Bloomberg described the Geneva talks as “friendly and unusual” and witnessed “mutual respect” between the two parties. “Everything is negotiable. But we have reached a good result of the United States, and also good for China,” said American commercial actor Jameson Gharr.
Despite the progress, not all sectoral fees were raised, as the drawings on steel, aluminum and cars are still in place, as well as the fees for China that were imposed during the first term of Trump.
On the other hand, China promised to suspend non -customs revenge measures such as the restrictions of exporting “rare ground minerals”, which Washington considered a priority in negotiations, according to “Financial Times”.
“The commitment to dealing with the United States according to the principle of mutual respect,” the Chinese “Xinhua” agency quoted the government as confirming that “the commitment to dealing with the United States according to the principle of mutual respect,” stressed that “pressure and threats are not the right way to deal with Beijing.”
Temporary opportunity or political mirage?
Despite the widespread welcome from the market, the scene was not without warnings. Larry, the chief economist at the “Makari Capital” company – Bloomberg – said that what has been achieved today is a positive step “but it is just the end of the beginning.
In a statement to “Financial Times”, Tai Hoy, the chief strategy of the market in GB Morgan, said that the 90 days may not be sufficient to reach a detailed agreement, but “allows a space for breathing, and sometimes that is all the markets need.”
The implementation of the agreement remains in doubt, especially after China failed to adhere to the “first stage” agreement signed in 2020. When Pesent was asked if the current agreement is reviewing that framework, the world answered, “The world has changed, the products have changed, and the productive mixture has changed … so everything is now on.”
Reflections on global trade .. beyond the numbers
Capital Economics estimated that the average American fees on Chinese goods will reach about 40%, while Chinese fees on American imports will reach about 25%.
Although these numbers are a significant decline, they do not return matters to what they were before 2018.
Bloomberg Economics expected that the remaining customs duties “may reduce America’s imports from China by up to 70% in the medium term.”
At the same time, shipping companies began preparing for an increase in the movement of trade across the Pacific Ocean. The Danish company “Merck” confirmed that the agreement is a “step in the right direction” while the German company “Habag-Led” said it would use larger ships in the lines of China-United States.
Political or economic strategy?
Analysts were divided into the real motives behind the agreement. While some see it as a sign of a real diplomatic transformation, others described the agreement as a “tactical decline” by Washington.
Democratic MP Eric Sawalwell on the “X” platform wrote that Trump “retreated against China … as I told you.”
On the other hand, the British Broadcasting Corporation “BBC” quoted a source in the White House as saying that President Trump “had received continuous updates during the Geneva negotiations, but he left the final decision of Pesent,” adding that “Trump said it was an issue decided by Scott.”
A temporary rest does not mean the end of the dispute
Although the armistice agreement between the United States and China has reduced direct economic concerns and the raising of morale in global markets, basic tensions – from intellectual property rights to fentian and currencies – are still ongoing.
The current armistice is not a peace treaty, but rather a temporary stop that gives the world a short period of calm before the next round.
As Larry Ho said, it is “not the end of the trade war. It is just a breakdown time.”
