U.S. and China Reach Agreement on Tariff Freeze Amidst Global Economic Uncertainty

This past weekend, the US and China held trade talks in Geneva, Switzerland. Both sides announced a retraction for 90 days.

On Monday, the 145% blanket tariff will be lowered to 30%. On China's end, they will cut the tariff on American goods from 125% to 10%

President Trump has labeled China as "ripping us off" to justify the heavy tariffs against the US's largest trade partner. The reason? The United States has the highest trade deficit with China. A trade deficit means that one country imports more than it exports. In the case of US-China trade, the US has a deficit of $294.5 billion in 2024.

What was the point of these tariffs in the first place?

President Trump believes that imposing tariffs on countries like China will bring manufacturing back to the United States. However, this logic has huge roadblocks, such as in the computing industry. For example, a motherboard manufacturer has a plant in China. Down the road from that plant is a company that creates chips. Down the road from them is a company that produces capacitors. These companies team up to limit costs and, in the end, help in the entire process. That type of infrastructure in the US is not in place.

In addition, the labor costs associated with those companies are at a level that promotes a healthy, profit-making business. If the example company were to move to the United States, labor costs would rise, and supply would be handicapped by less availability and higher part costs. The company would not be located near the component companies, and for that to happen, those companies would also have to relocate to the US.

With the pause on the extreme tariff against China, consumer sentiment should start pointing upwards. While there is still uncertainty about what will occur after the 90 days, this news should help bring the US economy back up.

Consumer Sentiment Chat from the University of Michigan