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\n <\/picture>The deal between the US and China to reduce for 90 days the tariffs recently imposed on imports of each other\u2019s goods is tentatively positive for global trade, but the situation remains unpredictable, according to an industry analyst.<\/p>\n
The agreement, announced on 12 May, represents a major de-escalation of the dispute between the two countries \u2013 at least temporarily \u2013 and has seen global stock prices rise as a result. It will see the US and China cut their tariffs on each other by 115pp, from 145% to 30% for Chinese goods entering the US and from 125% to 10% on some US goods entering China.<\/p>\n
In a joint statement<\/a>, the two countries acknowledged \u201cthe importance of their bilateral economic and trade relationship to both countries and the global economy\u201d and \u201cthe importance of a sustainable, long-term, and mutually beneficial economic and trade relationship\u201d.<\/p>\n Although doubts remain on how significant the deal\u2019s impact will be, on Tuesday China removed its ban on Chinese airlines doing business with US<\/a> manufacturers and service providers. <\/p>\n The statement added that, once the pause in tariffs is enacted from May 14, the US and China \u201cwill establish a mechanism to continue discussions about economic and trade relations.\u201d<\/p>\n Of this, Steve Blitz, chief US economist and managing director for global\/macro at TS Lombard, told Investment Monitor<\/em>: \u201cIt\u2019s obviously positive. Let\u2019s take the politics out of it for a second. If you turn it into a microeconomic or a game-theoretic point, there is an optimal tariff price. So, what do you want to achieve with a tariff?<\/p>\n \u201cYou don\u2019t want to stop trade, so you don\u2019t want an infinite tariff, but your objective is to make it more expensive to source from a particular country in order to really do two things: one is to shift production to the US, or make it more competitive for us exporters in the global world. So you are actually putting in a tariff for a positive trade outcome as opposed to a negative trade outcome.<\/p>\n Navigate the shifting tariff landscape with real-time data and market-leading analysis.<\/em> \u201cBut you don\u2019t want to necessarily negotiate to zero tariffs everywhere, and we\u2019ll use the broad word tariffs, so we\u2019ll include non-tariff barriers, OK. You don\u2019t want to get to zero because you also want to bring cash into the government.\u201d<\/p>\n The spiralling tit-for-tat tariffs that the US and China had placed on each other\u2019s goods were a result of the sweeping tariffs agenda being pursued by the new administration in the US when Donald Trump returned to office for his second term in January.<\/p>\n This has seen 25% fees placed on goods coming from Mexico and Canada<\/a>, as well as a slate of so-called \u2018reciprocal tariffs\u2019 for most countries around the world<\/a>. These are purportedly aimed at addressing US trade deficits, which Trump has claimed are \u201cunfair\u201d. Trump\u2019s other stated aims for the tariffs include generating revenue to lower domestic taxes and encouraging the onshoring of industry.<\/p>\n The result of introducing such sweeping tariffs on trade partners almost across the board will be an upending of global trade, with ramifications not just for the US and each of its trade partners but for trade flows outside of US trade relationships.<\/p>\n In April, Peter Swartz, the chief science officer of supply chain insights company Altana told Investment Monitor<\/em> that the upheaval being wrought by the proposed tariffs represented \u201ca very intense moment of deglobalisation\u201d.<\/p>\n Swartz noted that this shift towards protectionism has already been going on for over a decade and is \u201can inevitable product of the geopolitical stresses on the global system,\u201d with factors like the Covid-19 pandemic and geopolitical disputes at play.<\/p>\n He acknowledged, though, that the tariffs agenda of the Trump administration represents an inflection point, adding: \u201cWhere we think it\u2019s going is you will see that more multipolar world. You\u2019ll see that world in which, fundamentally, the world is\u00a0fragmenting into blocks<\/a>.<\/p>\n \u201cI can\u2019t tell you which specific blocks \u2013 what those blocks will look like. Your readers can read the news as well as I can. But what I can tell you is that it will not look like the previous era of easy global free trade across the entire planet, and what it will instead look like is more complexity, more regulation, and, really, a reordering, and there\u2019s the opportunity to thrive in that.\u201d<\/p>\n Swartz\u2019s outlook aligns closely with assertions in a number of recently published reports from\u00a0Investment Monitor\u2019s<\/em>\u00a0parent company GlobalData variously suggesting that \u201cthe era of easy, frictionless supply chains is over<\/a>\u201c, that Trump\u2019s tariffs will \u201cfurther disrupt global supply chains<\/a>\u201c but that a silver lining may be \u201cthe potential strengthening of regional and inter-regional trade ties outside the US,\u201d and that China is seeking to \u201cexpand its influence across developing markets<\/a> \u2026 with further fragmentation of global supply chains and even the creation of separate technospheres with competing standards.\u201d<\/p>\n Subsequent to today\u2019s joint statement, the White House released a separate statement calling the agreement \u201ca historic trade win for the United States\u201d.<\/p>\n It added: \u201cFor too long, unfair trade practices and America\u2019s massive trade deficit with China have fuelled the offshoring of American jobs and the decline of our manufacturing sector.\u201d<\/p>\n The statement noted that the US\u2019 trade deficit with China was the largest with any trading partner in 2024 at $295.4bn, and it stated that the agreement \u201cworks toward addressing these imbalances to deliver real, lasting benefits to American workers, famers, and businesses.\u201d<\/p>\n However, the landscape remains unclear for businesses and, indeed, entire sectors in part while there are pauses to the implementation of tariffs for negotiations and in part simply for the involvement of Trump himself.<\/p>\n \u201cYou\u2019re dealing with somebody who gets bored and moves to the next thing, and then he comes back and he doesn\u2019t like the progress so he decides to shake it up a little bit,\u201d Blitz said. \u201cSo, I think we\u2019re in a sweet spot right now, let\u2019s enjoy it. Let\u2019s not be the killjoy, but the thing that you\u2019re at the same time in this mode, where [to think that] everything\u2019s going to settle down and now iterate through a solution without any further histrionics or changes is probably wrong.\u201d<\/p>\n Navigate the shifting tariff landscape with real-time data and market-leading analysis. Request a\u00a0free demo of GlobalData\u2019s Strategic Intelligence here<\/a>.<\/em><\/strong><\/p>\n <\/p>\n <\/p>\n <\/p>\n
Request a free demo for GlobalData\u2019s Strategic Intelligence\u00a0here.<\/a><\/strong><\/em><\/p>\nUS-China trade war<\/h2>\n
Uncertainty remains<\/h2>\n
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