The United States and China on Monday took a step to defuse the trade war threatening the world’s two largest economies, agreeing to temporarily reduce the punishing tariffs they have imposed on each other.

The move by the United States, after President Donald Trump had repeatedly declared that he would not lower tariffs without concessions from China, represented an acknowledgment of the costs of an all-out trade war with China.

“We’re not looking to hurt China,” Trump said at the White House on Monday.

Explaining that many of the tariffs that he imposed remain in place, Trump said talks would be focused in part on “opening up” China to American businesses. He said that he expected to talk to President Xi Jinping of China later this week, but that putting a full deal on paper would take a while.

In a joint statement released earlier in the day, the United States and China said they would suspend their respective tariffs for 90 days and continue negotiations they started this weekend. Under the agreement, the US would reduce the tariff on Chinese imports to 30 per cent from its current 145 per cent, while China would lower its import duty on American goods to 10 per cent from 125 per cent.

The outcome of the frenzied weekend of negotiations in Switzerland brought tariff rates close to where they were before Trump ratcheted them higher on April 2.

“We concluded that we have a shared interest,” said Treasury Secretary Scott Bessent at a news conference in Geneva where US and Chinese officials met over the weekend.

China said it will suspend or revoke countermeasures adopted in retaliation for escalating tariffs. Bessent said the two countries may discuss purchase agreements of American goods by the Chinese government. Such a deal could help narrow the American trade deficit with China.

The agreement breaks an impasse that had brought much trade between the two countries to a halt.

Many American businesses had suspended orders, holding out hope that a deal could be struck to lower the tariff rates. Economists have warned that the trade dispute will slow global growth, fuel inflation and create product shortages, potentially tipping the United States into a recession.

Bessent placed blame on the Biden administration for failing to honour its commitments to the trade deal Trump reached with China during his first term.

Chinese factories also experienced a sharp decline in export orders to the United States, heaping additional pressure on a sluggish economy. Chinese producers looked to expand trade to Southeast Asia and other regions to circumvent the US tariffs.

Global markets jumped on the announcement. The benchmark index in Hong Kong surged 3 per cent, about the same amount as S&P 500 stock futures.

New York Times News Service