China: Tariff De-Escalation Softens the Blow

Following the weekend trade talks in Geneva, the U.S. and China released a joint statement today (May 12) agreeing to temporarily remove all tariff and non-tariff barriers announced since April 2, 2025. This would bring down U.S. tariffs on Chinese goods back to around 30% from its current level of 145% and Chinese tariffs on U.S. goods to around 10% from 125%. Both countries have agreed to continue discussions on trade and economic relations at a senior level.

Key Highlights
-- The de-escalation in tariffs will lessen any near-term damage to China's economic outlook.

-- Uncertainties remain as there is no guarantee that a 90-day truce will give way to a lasting agreement.

-- Furthermore, China's medium-term challenges remain - ongoing weakness in the property sector, ageing demographics and the shift in the U.S. China relationship - all of which are expected to translate into lower growth.

"The Geneva deal should provide some relief to the Chinese economy in the near term" says Rohini Malkani, Senior Vice President, Global Sovereign Ratings. "But we still anticipate a negative shock to the Chinese manufacturing industry, as the 30% tariff rate on Chinese exports is still much higher than the effective rate prior to the start of the second Trump administration's term."