On May 12, 2025, the United States and China reached a significant agreement to reduce reciprocal tariffs, aiming to ease tensions from a protracted trade war that disrupted global markets and supply chains. Announced after high-level discussions in Geneva, U.S. Treasury Secretary Scott Bessent stated that both nations agreed to a 90-day pause on new trade measures and would cut tariffs from over 100% to 10% .
This agreement follows months of escalating tariffs that had strained global supply chains and heightened inflationary pressures. The 90-day suspension is intended to provide a window for further negotiations aimed at achieving a more comprehensive trade deal.
Implications for India and Europe
India:
- Export Opportunities: The reduction in U.S.-China tariffs may open avenues for Indian exporters to fill gaps in supply chains, particularly in sectors like textiles, pharmaceuticals, and information technology.
- Investment Inflows: Stabilized global markets could attract increased foreign direct investment into India, bolstering economic growth.
Europe:
- Trade Stability: European exporters may benefit from the de-escalation, as reduced global trade tensions can lead to more predictable market conditions.
- Economic Growth: Improved global trade dynamics may support economic recovery efforts across European nations, especially those heavily reliant on exports.
While the 90-day tariff suspension marks a positive development, it remains a temporary measure. Both nations have expressed a commitment to ongoing negotiations to address broader trade issues. The global community will be closely monitoring these discussions, as their outcomes will have far-reaching implications for international trade and economic stability.
Global Market Reactions
United States:
- U.S. stock futures surged, with the S&P 500 and Nasdaq gaining 2.8% and 3.6% respectively, reflecting investor optimism about the easing trade tensions.
Europe:
- European markets responded positively, with the STOXX 600 index rising by 1%, buoyed by the prospects of stabilized global trade dynamics.