The U.S. and China have a deal to cut tariffs

The Effect of the U.S.-China Trade Agreement on Chinese Trade and the Status of the Group’s Industrial and Economic Growth: Comment on Grozoubinski

“Are we going to rebalance the fundamental nature of the global economy in which China is a massive manufacturing hub and the US is a consumption economy? No, I don’t think so,” said Dmitry Grozoubinski, executive director of Geneva Trade Platform and a former Australian diplomat and trade negotiator. There are things the two sides can do for one another that could make them both happy. There must be.

The deal was announced after both countries met in Switzerland over the weekend. China agreed to lower its taxes to 10% down from the 125% it imposed in response to the U.S.

“While the Chamber is encouraged by the decision, uncertainty remains,” said Jens Eskelund, president of the European Union Chamber of Commerce in China. “Businesses need predictability to maintain normal operations and make investment decisions.”

News that the U.S. and China have paused massive tariffs on each other has U.S. businesses rushing to import goods that have been sitting at ports or factories in China for the past 40 days.

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“Neither side wants a decoupling,” said Bessent “We do want trade, we want more balanced trade, and I think both sides are committed to achieving that.”

The Chinese “came to deal this week,” said Greer, citing rapid progress between the two countries, which have also agreed to establish a consultation mechanism to continue addressing trade issues going forward.

American tariffs on Chinese goods are set to fall from 1 45% to 30% in 90 days, while Chinese tariffs are set to fall from 1 25% to 10%.

The talks were led on the Chinese side by Vice Premier He Lifeng and on the U.S. side by Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent.

Bessent said at a press conference on Monday that they both have an interest in balanced trade. There is a positive path forward on the two countries working together to address the issue of Fentanyl smuggling.

“China has always pursuing win-win outcomes in its trade and economic negotiations, and therefore any possible deal to be reached will definitely by in the development interest of China’s own,” said Li Chenggang, a diplomat with China’s commerce ministry.

At the press conference after the meeting, the VP said that the atmosphere was constructive, and that it achieved substantial progress and reached important consensus.

Stocks opened sharply higher Monday after the U.S. and China announced a temporary break from triple-digit tariffs that had brought much of the trade between the two countries to a standstill in recent weeks.

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The pause comes after many businesses that rely on imports had halted deliveries to avoid paying a triple-digit tax. Cargo traffic at the Port of Los Angeles last week had fallen by more than a third from a year ago, raising the prospect of supply shortages in the near future.

Ross had pulled two cargo containers off ships in China when the 145% tariffs took effect. As a result of the lower tariffs, she’s scrambling to get as much U.S. merchandise as she can.

According to a news report, Jay Foreman, the CEO of his company, received news at 4:30 am that his company had a deal with a big toy manufacturer in China.

“We’ve been holding everything at the factories and at the ports, because we didn’t want risk putting anything on containers with a 145% tariff,” Foreman says.

Businesses might race to produce early for the Christmas holiday season to avoid higher tariffs later in the year. It’s also a gamble, since it’s possible the administration will lower tariffs at the end of the three-month window.

“Right now, I’m just trying to get through the next four to six weeks,” he says. I’ll probably need another three to four weeks to figure that out, whether or not I double shift the factories to try and get more produced and out the door before the end of the 90 days.

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More than 75 countries had contacted the US about seeking deals, according to President Trump, who paused tariffs on other countries for 90 days. Some of those tariffs may resume in early July.

Swonk said it’s going to be very hard for the Trump administration to hammer out 90 negotiations in 90 days with other countries, adding that even those deals that have been announced have very tentative rules around how they’re implemented.

Swonk said that the last time the U.S. experienced Stagflation was in 1970. During this time, oil prices spiked, and Americans accepted high inflation as a part of life.

“It’s not just a one-time event because of the layers that have been applied and the fact that there are different tariffs applied,” Swonk said. The disruptions that we are seeing right now are caused by a multiple time event.

This combination is what the Federal Reserve worries about most, Swonk said. The Federal Reserve voted earlier this month to keep interest rates steady, citing concerns about economic uncertainty and the risks of higher unemployment and higher inflation.

Swonk said the past 40 days has resulted in a paralysis on importing goods and now panic to bring them in. Those two factors, she added, can make for stagflation, a period during which the economy experiences higher costs for goods, higher unemployment and slower economic growth.

“This is the same thing where all of a sudden a lot of freight shipment fees went way up in the wake of the pandemic, which was an additional cost in addition to the tariffs,” she added.

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But “these sort of stop-go programs are the things that can make for very big policy mistakes,” Swonk said, adding that when considering inflation and how it impacts the U.S. economy, “we remember the pandemic and it’s much easier to shut factories down than ramp them back up again.”

It will take time for goods released in response to lower tariffs to reach the U.S market, so shoppers could still see some empty store shelves.

“Everyone all of a sudden slows down to a crawl to try to creep across the stoplight, not knowing which person’s supposed to go next,” Swonk said. Some people opt out and go back to their original way, waiting for traffic to clear or the stop light to be fixed.

Stocks surged after news of the deal. But uncertainty is a major factor that will continue to weigh on the U.S. economy, Diane Swonk, chief economist at accounting firm KPMG US, told Morning Edition.

The CEO of Basic Fun!, a company that produces classic toys like Care Bears and Tonka trucks, told Morning Edition that the sudden change from a 145% rate to a 30% rate felt like a lifeline, but he still felt the sting of paying increased tariffs.

Jay Foreman: I was pinged at 4:30 in the morning. I literally jumped out of bed, threw some water on my face and started calling my office in Hong Kong and my factories in China to tell them, let’s get going. Let’s order trucks to pick up at the factories and let’s book space on container ships. I was thinking in my head, that we will just get going and everything will be rolling. And then, of course, I get into the office and my operations team says, wait a minute, it’s not that easy just to turn the switch and get everybody going again. There are still many processes that need to happen to get these orders back in place.

“We can be in business,” he said. If the burden falls on manufacturers like us, we’re in trouble. Everyone — retailers, factories, and consumers — needs to share the pain.”

He estimates retail prices could rise 10% to 15%, if everyone in the supply chain absorbs part of the cost. Otherwise, companies with slim margins won’t survive.

During the holiday season, toymakers need a good sales period because shelves are usually empty during this time. But Foreman remains cautious. He said the market could be paralyzed if the administration reverses course again.

Foreman spoke with NPR’s Michel Martin about how shifting U.S and China trade policies – including a temporary tariff rollback – are impacting his business and the broader economy.

30% tariffs is better than 145%. You said that it is like drinking spoiled milk instead of poison. By the way, very vivid imagery. Why are you saying that?

Martin: But you were really worried that you might actually not have anything to sell at Christmas. Let’s just be honest, which would have shut you down, right?

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The man is said to be the Foreman. Yes, for sure. 145% [tariffs] would have put my business and many, many others out of the market and out of business and [caused] a huge shortage of merchandise for the holiday season. The 30% gets things moving. You’re likely to see prices increase, if everybody takes their part, about 10 to 15%. We would assume that the market will be able to absorb that if unemployment stays around a reasonable level and the stock market stays high. Things will move on. We will see whether the president’s experiment works or not.

Foreman: Well, if he makes another U-turn, it’s just chaos for everybody again. And this is where they’ve got to sort of settle down. We were able to get the team to go to Switzerland. This JV team is still out there working with every other market. And the president, of course, can lob a grenade into the middle of this at any time. They need to move on and let people do business this year. And let’s have Christmas.