US-China hit pause on sky-high tariffs

Politico

12-05-2025

With help from Doug Palmer
QUICK FIX
— The United States and China slashed tariffs on each other's goods in a surprise breakthrough aimed at reviving trade between the economies.
— British plane and aircraft parts are exempt from any potential tariffs that could stem from the Trump administration's latest Section 232 investigation.
— Alabama Republicans are asking the Commerce Department to set tariff rates on lumber to at least 60 percent.
It's Monday, May 12. Welcome to Morning Trade. Got news tips? Suggestions? Want to grab a coffee? Hit us up at: [e-mail], [e-mail] and [e-mail]. Follow us on X: @_AriHawkins, @drdesrochers and @tradereporter.
Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You'll also receive daily policy news and other intelligence you need to act on the day's biggest stories.
Driving the day
TARIFFS DELAYED: The United States and China agreed to slash tariffs on each other's imports for 90-days, and implement a new platform to resolve trade disputes, according to a joint statement from Geneva.
Starting Wednesday, the U.S. will temporarily lower its tariffs on Chinese imports from 145 percent to 30 percent, while the Chinese side will drop measures from 125 percent to 10 percent.
'We want more balanced trade. And I think that both sides are committed to achieving that,' Treasury Secretary Scott Bessent said at a joint press conference from Switzerland, where Trump administration officials were meeting with the Chinese delegation. 'We would like to see, China open to more U.S. goods. We expect that as a negotiation to proceed.'
The countries' joint statement says that the U.S. and China will 'establish a mechanism to continue discussions about economic and trade relations,' which will be led by China's Vice Premier He Lifeng, alongside Bessent and U.S. Trade Representative Jamieson Greer. Senior U.S. officials said the countries also discussed fentanyl, and that negotiations may lead to 'purchasing agreements' by China.
'Both sides represented their national interests well, but we also concluded that we had shared interests and that neither side was interested in a decoupling,' Greer said at the press conference.
Some context: The update comes after both the U.S. and China touted substantial progress in negotiations over the weekend, and as commerce between the countries begins to grind to a halt, as American retailers suspend orders, prompting fears of shortages.
Both President Donald Trump and Chinese leadership had gotten increasingly desperate to nail down an off-ramp to trade tensions in recent months. The latest agreement could also lay the groundwork for future negotiations toward a broader trade pact, in the vein of the so-called Phase 1 deal.
Rewind: Trump spent his first few months in office trying to compel Chinese leader Xi Jinping to the bargaining table. Unlike other countries targeted by U.S. tariffs, China has not rushed to request consultations nor offered deals to cut its trade barriers — rather it has retaliated with higher tariffs of its own. That prompted an escalating tit-for-tat on trade that has made it prohibitively expensive for the two countries to buy each others' goods.
Around the World
AEROSPACE EXEMPT: British plane parts are exempt from any new tariffs that could stem from the Trump administration's latest national security investigation into imports of commercial aircraft, jet engines and their parts, a White House official confirmed to your host.
The exemption is part of the evolving terms of the U.S.-U.K. framework that both sides announced last week, the White House said. The countries' agreement eliminated some trade barriers and laid out negotiations for more contentious sticking points, such as the U.K.'s Digital Services Tax.
Reminder: Commerce on May 1 launched an investigation into imports of commercial aircraft, jet engines and their parts, laying the groundwork for another round of tariffs, according to a filing made public on Friday. A full document on the investigation is set to be published tomorrow.
FYI: The aerospace industry produces among the largest trade surplus of any sector in the U.S., and many companies rely on specialized suppliers for parts that are sometimes produced only by select manufacturers scattered around the world.
Around the World
U.K. BEEF DEAL COULD HURT BRAZIL: The U.K.'s gain could be Brazil's loss.
The framework agreement announced last week gives the U.K. a 13,000 metric ton low-duty quota to ship beef to the United States. That will come out of the 65,000 metric ton quota for 'Other Countries' that don't have a specific quota allocation. Brazil is the largest user of the Other Countries quota, often supplying more than 90 percent.
The U.K. agreement also increases a duty-free quota for the U.S. to ship beef to the U.K. to 14,000 metric tons, from 1,000 tons previously. That's expected to be reserved for beef from cattle raised without artificial growth hormones. The industry hopes for 'more details soon on how the quotas will be implemented,' Kent Bacus, executive director of the National Cattlemen's Beef Association, told Morning Trade.
The beef concession to the U.K. could complicate trade talks with Brazil, which has long wanted more access to the United States for its agricultural products.
On The Hill
ALABAMA GOP WANT LUMBER TARIFFS: Alabama Republicans are asking the Trump administration to set the duty rate on timber and lumber products to at least 60 percent, as it pursues a Section 232 investigation, according to a letter first obtained by Morning Trade.
'In recent years, our $12 billion domestic cabinet industry has been devastated by unfairly traded imports of kitchen cabinets and cabinet components,' wrote Sens. Katie Britt and Tommy Tuberville, as well as Reps. Barry Moore, Gary Palmer, Mike Rogers, Dale Strong and Robert Aderholt in a note sent Thursday to Lutnick and Undersecretary of Commerce for Industry and Security Jeffrey Kessler.
The Alabama Republicans note that the U.S. kitchen cabinet industry supports 250,000 jobs around the country and 5,000 in Alabama, and warn some U.S. manufacturers are operating at as low as 30 percent capacity.
Reminder: Trump in March ordered an investigation focused on the lumber industry as part of a broader strategy aimed at making the United States self-sufficient in timber and lumber production.
'IN THE DARK': Sen. Elizabeth Warren (D-Mass.) and Rep. Rosa DeLauro(D-Conn.) said the Trump administration has failed to communicate the status of trade talks to Congress.
'The public has been left completely in the dark on the status of these negotiations—or forced to rely on vague, second-hand accounts of private meetings, including those that Secretary Bessent is reportedly holding with well-connected industry insiders,' the lawmakers wrote in a letter dated Thursday and sent to Lutnick, Bessent and Greer.
TRADE OVERNIGHT
— Taiwan trumpets investments as it seeks to avoid US tariffs, POLITICO Pro reports.
— USDA re-pauses livestock imports from Mexico as screwworm risk grows, POLITICO Pro reports.
— US senator introduces bill calling for location-tracking on AI chips to limit China access, per Reuters.
— Trade war is about more than just trade, China's official news agency argues, per POLITICO Pro.
THAT'S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: [e-mail], [e-mail] and [e-mail]. Follow us @POLITICOPro and @Morning_Trade.