A US-China trade agreement to sharply lower reciprocal tariffs for 90 days that emerged on Monday May 12 boosts the outlook for trade and the economy, according to analysts and market observers.
Robert England
12 May 2025
Fastmarkets Metal and Mining
Under the bilateral agreement, crafted over the weekend of May 10-11 in Geneva, Switzerland, in high-level discussions, tariffs for US goods going into China will fall from 125% to 10% while duties for Chinese goods going into the US will drop from 145% to 30%, according to The White House.
The impact on metals and minerals may be muted, given the various sectoral tariffs in place or under investigation.
Sectoral 25% tariffs on autos, auto parts, steel and aluminium remain intact.
Investigations into semiconductors, copper, critical minerals, timber, lumber and trucks remain to be completed.
Economic analysts expect the 90-day deal to push up economic growth in the US and China over prior forecasts.
“This change in China tariffs could imply around 0.4% additional gross domestic product (GDP) growth this year, and potentially a little boost to next year too of 0.2%,” Jonathan Pingle, chief US economist at UBS Investment Bank, said.
As a result of the deal, J.P.Morgan upgraded its outlook for China’s growth this year, raising the GDP forecast from 4.1% to 4.8%.
“This is a signal we’re going to be doing much more trade with China,” Leland Miller, chairman of China Beige Book, said in an interview on CNBC.
“In the short run, businesses are beginning to breathe a sigh of relief. They will begin to examine their import schedule for the next few months and will make firmer purchase plans for the back-to-school season,” Sunderesh Heragu, chair of engineering and management at the School of Industrial Engineering and Management at Oklahoma State University, said.
“However, it should be noted that the tariffs are still as high as 30% for Chinese goods coming to the US. Businesses may be willing to absorb costs in the short run to maintain some level of continuity in the supply chain,” he said. “They will also be waiting to see if there are any clear signals on what the steady state tariff regime is going to be. Most businesses think it will be somewhere between 10% and 30%.Market reacts
Share prices for automotive and steel companies soared, with the US dollar and oil also moving higher amid declining gold prices.
Kevin Dempsey, president and chief executive officer of the American Iron and Steel Institute (AISI), applauded the agreement and thanked President Donald Trump, Treasury Secretary Scott Bessent and US Trade Representative (USTR) Jamieson Greer for the new trade agreement.
“Chinese steel production remains at record high levels even as steel demand in that country has been declining,” Dempsey said. “Chinese steel exports have more than doubled since 2020, surging to 118 million tonnes in 2024 — more than total North American steel production — while China’s steel imports have dropped by almost 80%.”
“Through its Belt and Road Initiative, the Chinese government is encouraging cross-border investments by Chinese steel producers which are resulting in additional export-oriented steelmaking capacity outside of China — particularly in Southeast Asian countries like Indonesia and Vietnam,” Dempsey said.
“Accordingly, AISI appreciates that the Section 232 steel tariffs and the Section 301 tariffs on steel from China will remain fully in effect under this new agreement. This is significant for our industry, which is essential to America’s national and economic security,” Dempsey said.
Pathway forward
A joint statement posted by the White House on Monday said that China and the US are committed to lowering the tariffs by May 14.
Once tariffs are lowered, China will begin “to suspend or remove the non-tariff countermeasures taken against the United States since April 2, 2025,” which would include restrictions on exports of rare earth minerals.
Following China’s removal of recently imposed non-tariff barriers, the US and China “will establish a mechanism to continue discussions about economic and trade relations,” according to the joint statement.
In the next phase, high-level discussions will be held “on economic and trade relations” between He Lifeng, vice premier of China’s State Council, and Secretary Bessent and USTR Greer.
The talks are to be held alternatively in China, the US, or a third country.
The two sides may also conduct working-level consultations.
Trading strategy
The new deal marks a watershed in the tariff turmoil that unfolded after the unilateral imposition of reciprocal tariffs on “Liberation Day” on April 2, sources said
The aggressively high tariffs led to “unruly” reactions, “disruptions and dislodgements” in the market, David Zervos, chief market strategist at Jefferies, said in an interview on Monday on CNBC.
“We’re seeing how this President negotiates. He goes in with the big, sort of destabilizing moves, and then brings everybody back — and we’re going to have to get used to that again,” Zervos said, noting the President’s previously employed that trade negotiating style from 2017 through 2019 in his first term.
Ahmad Assiri, research strategist at Pepperstone, described the US-China deal as “a reverse version of Liberation Day. Not a full removal of barriers, but a softening of them. Still, it was enough to let markets breathe and offer participants a moment of cautious hope, even if only for now.”
“Economically, this step back in tariffs is not a structural fix or a comprehensive deal. But it signals a change in tone or, at the very least, a political willingness to pause,” Assiri said.
“Even if temporary, this truce could give growth a nudge. That said, investors are likely to keep a close eye on upcoming bilateral meetings which will shape the path beyond this 90-day pause,” the strategist said.
Steel market observers are taking a wait-and-see attitude to what the new deal means.
“I don’t see any real impact to the steel industry. The direct imports from China are dwarfed by our good friends transshipping steel products and that’s the bigger issue,” a distributor said referring to imports from China arriving in the US via Southeast Asia, Canada and Mexico.
“Anyone importing from China either adjusted their supply chain or is not concerned about 115% or 185%. I would hope this pause serves as a wake-up to those heavily relying on Chinese imports and they adjust their supply chains to be more diverse,” the distributor said.
“Bottom line is that a half trillion trade deficit [between China and the US] is too high,” the distributor said.
Grace Asenov in New York contributed to this article.
