US and China agree to critical extension, preventing tariff surge on the world's two largest economies
The news, first reported by CNBC, comes hours ahead of a 12:01 am ET deadline when tariffs on Chinese goods were set to rise to 54 percent from 30 percent, and Chinese tariffs on American exports would return to 34 percent from 10 percent.
In a joint statement with the US, China confirmed the 90-day trade truce extension and said it would maintain the 10 percent tariffs it has imposed on American goods during that period. The statement was based on the bilateral negotiations that took place in Sweden last month, it said.
The extension comes after Trump imposed a slew of 'reciprocal' tariffs on trading partners around the world, which have raised the United States' effective tariff rate to levels not seen since the Great Depression.
Higher tariffs on Chinese goods, America's second-largest source of imports, would have almost certainly raised the costs many American businesses and consumers could pay — or already are paying — because of increased import taxes Trump has enacted.
After meeting in Sweden in July, Chinese negotiators went as far as to say that a deal was reached. Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer, both of whom attended the meeting, disputed that, saying nothing was final without Trump's word.
'We'll see what happens. They've been dealing quite nicely. The relationship is very good with President Xi and myself,' Trump said earlier on Monday.
A White House fact sheet on the extension said trade discussions with China have been 'constructive' and quoted Trump saying: 'We're getting along with China very well.'
At the conclusion of last month's meeting with Chinese trade officials, Bessent said he warned his Chinese counterparts that continuing to purchase Russian oil would bring about huge tariffs under legislation in Congress that allows Trump to impose levies up to 500 percent.
It's not clear if the administration is prepared to double down on those threats yet. Trump recently threatened India, which also purchases Russian oil, albeit considerably less than China, with a 50 percent tariff rate if it continues to do so by the end of this month.
The move to penalize India and not other countries purchasing oil from Russia has been widely criticized by the Indian government, which claims it's being unfairly singled out. Trump suggested that more countries could face similar threats. 'You're going to see a lot more. So this is a taste,' he said last week.
And over the weekend in a Fox News interview, Vice President JD Vance said such tariffs on China are on the table, though Trump had not yet made a decision.
'Given that we seem to be headed toward some type of deal with China leading to some kind of meeting between Xi and Trump, the administration has definitely been more conciliatory towards China in the past few weeks,' said Wendy Cutler, a former US trade negotiator who is now vice president of the Asia Society Policy Institute.
Were China to give in to the administration's desires to stop purchasing Russian oil, it would be done 'quietly and gradually' rather than a Trump announcement on social media, she added.
Much remains unresolved
Bessent also said he voiced concerns and regrets about China's sales of over $15 billion worth of dual-use technology equipment (that is, equipment that has both commercial and military uses) to Russia and its purchase of sanctioned Iranian oil.
Another sticking point between the US and China has been exportations of rare earth magnets. China agreed to increase exports, but Trump says China has not held up its end of the bargain.
The US also wants to find an American buyer for TikTok, which is currently owned by a Chinese company. Congress has set out a timeline for the app to find new ownership or face a US ban.
US stocks closed lower Monday ahead of key inflation data set to be published Tuesday morning.
This story has been updated. An earlier version misstated the tariff rate the United States would have placed on Chinese goods if the pause had not been extended
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