The two largest economies in the world have reached a temporary tariff truce, much to the relief of investors and trading partners across the Indo-Pacific.
The U.S. and China wrapped their first round of trade talks in Geneva over the weekend, agreeing to roll back tariffs for 90 days while negotiations continue. The U.S. will cut its baseline rate on Chinese goods from 145 per cent to 30 per cent, while China will reduce its rate on American goods from 125 per cent to 10 per cent.
The truce, which soothed skittish markets, represents a significant de-escalation in the U.S.-China trade war and a climb-down for U.S. President Donald Trump, who has used the threat of tariffs to secure deals with other countries on issues spanning border security, foreign investment, and narrowing the U.S. trade deficit.
The resolution bodes well for Canada, smoothing ripples in the global economy. But risks persist: the U.S. may now be keen for Canada to follow the example of China (and the U.K.) in hurrying along “initial” or “preliminary” trade deals.
In a joint statement released Monday, Washington and Beijing recognized “the importance of [the] bilateral economic and trade relationship to both countries and the global economy,” and pledged to advance “in the spirit of mutual opening, continued communication, cooperation, and mutual respect.”
U.S. Treasury Secretary Scott Bessent, Washington’s point person for the negotiations, said talks were “always respectful.” Trump called the talks a “total reset.” Beijing was more circumspect. According to state media, Chinese vice premier He Lifeng saw the talks as “an important step towards resolving differences.” The new tariff rates came into effect yesterday.
Devil’s in the details
Although the ‘headline’ baseline figure is 30 per cent, the effective U.S. tariff rate on China is closer to 40 per cent due to Washington’s existing levies on Chinese steel, aluminum, and other products.
Washington also quietly cut its “de minimis” tariff from 120 per cent to 54 per cent this week, offering relief to Chinese companies such as Shein and Temu that ship low-cost items to the U.S. Before Trump applied tariffs in February, a “de minimis” exemption existed, allowing foreign companies to ship products valued up to US$800 free of charge.
In April, China's exports to the U.S. fell 21 per cent year-over-year, while exports to India and ASEAN increased 20 per cent.
China mending fences
As U.S.-China ties stabilize, Beijing is also looking to patch up relations with Canada. China’s ambassador to Canada, Wang Di, sat down with CTV for an interview that aired on Sunday. Wang said that he was “full of confidence” for the Canada-China relationship. “China is now ready to move on and look ahead,” said Wang, who, before the tariff rollback, called U.S. trade actions “unilateral, protectionist bullying acts.”
Canada’s most recent batch of trade data shows Canadian exports to the U.S. declined by 6.6 per cent from February to March 2025. Over that same period, Canadian exports to parts of Asia boomed, led by Hong Kong (259%), Indonesia (163%), Australia (70%), Taiwan (51%), and South Korea (27%).
Canada’s newly minted foreign affairs minister, Anita Anand — appointed on Tuesday as part of Prime Minister Mark Carney’s new cabinet — will be tasked with strengthening ties and trade with Indo-Pacific partners, while repairing the Canada-India relationship and building on the momentum of Canada’s 2022 Indo-Pacific Strategy.
