The US and China have agreed to initially withdraw tariffs on each other’s products for 90 days.
According to a report by the American broadcaster ‘CNN’, this announcement came at the end of long trade talks by officials of the world’s two largest economies in Geneva, Switzerland.
In this regard, the joint statement said that by May 14, the US will temporarily reduce tariffs on Chinese products from 145% to 30%, while China will reduce tariffs on US imports from 125% to 10%.
The statement said the two sides also agreed to establish a mechanism to continue discussions on economic and trade relations under the leadership of Chinese Vice Premier He Lifeng, US Treasury Secretary Scott Besant and US Trade Representative Jamieson Greer.
The statement said that these discussions could be held alternately in China and the US, or in a third country with the agreement of the parties. The two sides could hold working-level consultations on related economic and trade issues as needed.
Washington had mentioned progress towards an “agreement” after the talks concluded on Sunday, while Beijing mentioned mutual agreement to start formal economic and trade negotiations.
The trade war has already affected the economies of the US and China, with US port officials telling CNN on Friday that no cargo ships had passed from China to two major West Coast ports in the past 12 hours, a first since the Covid-19 pandemic.
Stock markets around the world rise
Global investors have celebrated the thaw in the trade war, which was sparked by US President Donald Trump’s heavy tariffs.
The trade war between the US and China has roiled financial markets, disrupted supply chains and raised fears of a recession.
Stock markets around the world started to rise on Monday after the two global trading powers agreed on this key issue.
Hong Kong’s Hang Seng Index rose 3.4% in the evening local time after the US and China agreed to significantly reduce tariffs on each other’s goods for the first 90 days.
In Europe, Germany’s DAX index and France’s CAC were up 1.2 percent and 1 percent, respectively, in early trading.
London’s FTSE index rose 0.3 percent, while US futures were also higher.
The Dow was set to open 2.1 percent higher, while the S&P 500 and tech-heavy Nasdaq futures were up 2.7 percent and 3.6 percent, respectively, with Brent crude, the global oil benchmark, trading 2.8 percent higher.
Tariff cuts are in the ‘general interest of the world’, China
On the other hand, the BBC report said that China says that tariff cuts are in the ‘general interest of the world’.
The Chinese Ministry of Commerce said that China hopes that the United States will continue to work to ‘trade with China’, and tariff cuts are in the ‘general interest of the world’.
Dollar and Yuan Increase in Value
According to BBC News, the value of the US dollar and yuan has increased after the announcement of an end to the trade war between China and the United States.
The value of the dollar has increased against the British pound, the euro and the Japanese yen, and the yuan has also increased against these 3 major currencies and the dollar.
What are tariffs, and how do they work?
The end of the trade tariff war between the United States and China is a major development. Tariffs are taxes that are imposed on goods purchased from other countries, usually a percentage of the price of a product.
According to BBC News, a 10 percent tariff means that if an item costs $10, it will be taxed at 10 percent, which will bring the total cost to $11.
Companies that import foreign goods into the United States must pay taxes to the government, which can pass on some or all of the additional cost to customers. Companies can also decide to import fewer goods.
Raising tariffs on products from another country by one country means that the goods become more expensive for customers, which causes customers to look for cheaper alternatives to these expensive products.
Thus, higher tariffs increase the price of products from another country and significantly reduce their sales, which means a decrease in profits for the companies that make the products.
A company that experiences a decrease in sales and profits also loses foreign exchange to the country to which it belongs.
