Temporary Truce: Why the U.S.–China Trade Agreement Leaves More Questions Than Answers

The U.S. and China have agreed to roll back some of the harshest tariffs imposed during the latest round of their trade conflict. For now, the "reciprocal tariffs", as high as 125%, will fall to 10% for a 90-day period. Markets reacted with relief. But this agreement does not represent a final solution. It is a ceasefire, not a peace treaty.

The talks in Geneva between U.S. negotiator Bessent and China’s Vice Premier He Lifeng led to this pause. In return for tariff reductions, China agreed to scale back other retaliatory measures, such as limits on rare-earth exports. However, earlier tariffs remain. These include a 20% U.S. levy tied to fentanyl-related products.

The 90-day agreement buys time. Tariffs may return if no permanent deal is reached. In fact, the U.S. still considers the original 34% tariff on China, announced on “Liberation Day,” as its fallback position. It could snap back into effect with little warning.

Despite the temporary reprieve, the economic damage has been significant. Chinese exports to the U.S. dropped by 21% in April compared to the previous year. Prices of Chinese goods have climbed steadily on major American retail platforms, as shown by data from Alberto Cavallo of Harvard University.

While the 10% tariff brings some short-term relief, China continues to face higher U.S. duties than other countries. Biden-era tariffs on electric vehicles, for instance, remain in place. Chinese officials are pushing for a more balanced treatment but face tough negotiations ahead.

Importantly, the agreement has injected new uncertainty into global trade. Most trade deals take years to finalize. This one is expected to be re-evaluated in just three months. Businesses don’t know what costs they’ll face next quarter, making planning difficult.

In the meantime, Chinese exporters may act swiftly. They could frontload exports to the U.S. to avoid higher costs later as they did recently. This might temporarily boost China’s trade surplus with the U.S., but it also adds more volatility to the global supply chains.

The political outlook is no less uncertain. Trump’s trade policies remain unpredictable. Even within the 90-day window, decisions may shift based on domestic pressures or global events. As a result, Chinese officials are expected to continue diversifying export markets and boosting domestic consumption. Alfredo Montufar-Helu of The Conference Board notes that Chinese producers may regain competitiveness under the reduced tariffs, but the relief is temporary.

This agreement doesn’t mark the end of trade tensions. It only resets the clock. For now, global markets can breathe a little easier. But the fundamentals of the U.S.–China trade relationship remain deeply fractured.

What happens after 90 days? No one knows for sure. Until then, uncertainty will continue to remain the defining feature of U.S. trade policy.