Dow soars as trade war with China partially paused
The Trump administration declared victory in a trade war with China Monday after a temporary economic ceasefire that sent the Dow leaping 1,100 points.
According to Secretary of the Treasury Scott Bessent, the “deal” reached between Beijing and Washington will see tariffs temporarily reduced by both governments, leaving U.S. importers paying 30% dues on Chinese made goods while Chinese importers cough up an extra 10% on U.S. goods.
“We have reached an agreement on a 90-day pause and substantially moved down the tariff levels — both sides, on the reciprocal tariffs, will move their tariffs down 115%,” the Treasury Secretary said at a press conference in Geneva, Switzerland.
The stock markets responded with glee, and by the end of the day the Dow Jones Industrial Average was up about 2.8%, the S&P 500 by about 3%, and the Nasdaq Composite by around 4%.
The tariffs had been set at 145% on most Chinese goods entering the U.S. and at 125% on U.S. goods headed into China. They got to that level after President Donald Trump entered a tit-for-tat fight with the Chinese government which saw rising U.S. tariffs met with similar measures from Beijing.
The first round of tariffs, ostensibly aimed at reducing the amount of fentanyl and fentanyl precursors illegally brought into the United States but manufactured in China, were established on Feb. 1 and March 3 and each added a 10% tax on U.S. imports from China. The Chinese government swiftly responded by imposing equally sized import duties on U.S. natural gas, coal, farm machinery, food, and some specific agricultural products.
Trump’s April 2 “Liberation Day” global tariff announcement added an additional 34% tax on top of the earlier 20%. After China responded on April 4 with broad-based 34% tariffs of their own, Trump announced on April 8 that the U.S. duty would jump by another 50% to 104%.
The next day, China answered with an 84% duty on U.S. imports. A day after that Trump upped the U.S. imports tax once more, to 145%, and within days China again responded with their own larger levy, topping out at 125%.
Bessent described the sky-high tariffs as a sort of “embargo” and noted that “neither side wants that. We do want trade.”
“We want more balanced trade,” he said. “And I think that both sides are committed to achieving that.”
Dropping import fees to 30% and 10%, according to the Chinese Commerce Ministry, “aligns with the expectations of producers and consumers in both countries and serves the interests of both nations as well as the common interests of the world.” The ministry encouraged the Trump Administration to refrain from future use of “the erroneous practice of unilateral tariff hikes.”
What did the U.S. president get for his efforts? According to the White House, the 90-day pause on tariffs represents a “historic trade win for the United States” and is a further example of the “art of the deal” in action. According to Harvard economist Dani Rodrik, the agreement doesn’t solve any problems except those that Trump created.
“As the US and China step back from a needless trade war, it is worth noting that (a) US tariffs on China will remain high (30%) and will hurt mainly US consumers; and (b) Trump has obtained absolutely nothing from China for all the chaos he generated. Zilch,” he said via social media.
Brooke Thomson, the president and CEO of Bay State-based business group the Associated Industries of Massachusetts, said that the plan is a positive development but cautioned a 90-day pause isn’t enough to help restore falling business confidence.
“The agreement between the United States and China to suspend their respective tariffs for 90 days represents a step in the right direction but does little to resolve the long-term uncertainty that has eroded confidence among Massachusetts employers. The AIM Business Confidence Index last month hit its lowest level since the Covid-19 pandemic. It also remains to be seen whether the new agreement’s 30 percent tariff on imports from China will eliminate the possibility of product shortages,” Thomson said.
According to the Trump Administration’s U.S. Trade Representative, Ambassador Jamieson Greer, the economy will respond well to the negotiated ceasefire.
“We are going to have our economy continue taking off as we put structure around these negotiations and get global trade into a better place,” Greer said.
While both Bessent and Greer were in Geneva negotiating on behalf of the U.S. to lower tariffs, Trump was back home defending his tariff policy as an economic winner.
According to the U.S. President, the tariffs have meant that “TRILLIONS OF DOLLARS (and therefore, record numbers of JOBS!) HAVE BEEN POURING INTO THE USA. THIS IS BECAUSE OF MY TARIFF POLICY, and our great November 5th Election WIN!”
“The very STUPID Democrats are doing everything within their power to disparage what is happening. They are totally unhinged, and have lost all levels of Confidence. It is a financial REVOLUTION, and they are being Crushed. MAGA,” he wrote, emphasis his.
Monday’s announcement of a reduction in tariffs will apparently not impact import taxes on Chinese steel and aluminum nor will it reinstate the “de minimis” tariff exemption on orders worth less than $800, which the Trump Administration nixed earlier this month.
Herald wire services contributed.
Originally Published: May 12, 2025 at 4:56 PM EDT