The U.S. and China just hit pause on the tariff war – see what the deal covers and what it doesn’t. 

The White House just announced that the U.S. and China will temporarily scale back tariffs on each other as they work to find a long-term trade deal.  

Ever since President Trump’s “Liberation Day” announcement on April 2, Americans – and the stock market – have been on a rollercoaster ride as new tariffs are announced, raised, paused, and suspended.  

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It can be hard to keep it all straight. Here are the facts you need to know:   

The Context  

The U.S. has a large trade deficit with China, meaning Americans buy more Chinese-made goods and services than we sell to China.  

In 2024, the U.S. imported nearly $440 billion worth of goods from China, while China only bought $143.5 billion worth of American-made goods. As for services – like banking, consulting, and entertainment – the U.S. sold $46.7 billion to China while only buying $26.5 billion. All told, America’s trade deficit with China was $268.5 billion – the single biggest trade deficit in the world last year. 

President Trump, and many of his economic advisors, believe large trade deficits are a serious problem for the U.S., while other economic thinkers believe it is not a cause for significant concern. 

There is more agreement across the political spectrum that the U.S. should be concerned that China is dominating some of the most critical industries for national security like steel and aluminum, rare earth minerals, and smartphones and computers. That’s why President Trump – and his predecessors – are nervous about our nation’s reliance on China for key inputs into our economy.  

Tariff Timeline 

Shortly after taking office, President Trump imposed a 10% tariff on all Chinese goods on February 1, 2025. He cited China’s unwillingness to crack down on exports of chemicals that are fueling the fentanyl and opioid epidemic in the U.S.  

Just over a month later, President Trump doubled the tariff – raising it to 20%. He again pointed to opioids flowing to the U.S. from China. 

As part of the “Liberation Day” tariff announcement on April 2, President Trump raised tariffs on all Chinese imports to 34%.  

When China retaliated by raising their rates on American goods, President Trump bumped tariffs up to 104% on April 8.  

The very next day, in response to further retaliation from China, President Trump set tariffs at 145% for all goods from China. And that was just the floor: goods like aluminum and steel came with their own, higher rates.  

This chart lays it all out. Keep in mind that all of these rates are just the floor; certain goods like steel or solar panels have their own specific tariff rates, which were added on top of President Trump’s baseline tariffs:  

The U.S. – China Trade Deal, Explained 

Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer met with their Chinese counterparts in Geneva, Switzerland to negotiate a peace treaty of sorts in the tariff war.  

The White House announced what they described as a landmark deal on May 12. Both countries will reduce their tariffs on the other by 115%. For the U.S., that leaves us with a 30% tariff on Chinese imports. For China, they’re left with a 10% tariff on American goods and services. 

And here’s the fine print of the deal:  

  • The reductions will take place Wednesday, May 14. 
  • It’s only a 90-day pause. If negotiators can’t reach another deal, the previous tariff rates kick back in. 
  • China also agreed to remove some non-tariff barriers like export restrictions or blacklisting American companies. 
  • The agreement doesn’t apply to U.S. tariffs on imported cars, steel, or pharmaceuticals – those still face higher tariffs.  

While there’s still a long way to go, investors were clearly happy about this pause. Stock markets surged Monday in response to the trade deal announcement.   

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