Geneva Agreement and Tariff Reduction
Under the agreement reached in Geneva on May 12, 2025, the US and China agreed to a massive reduction in mutual tariffs. The US reduced tariffs on Chinese imports from 145% to 30%, while China reduced tariffs on US goods from 125% to 10%. The agreement was to remain in force for 90 days so that the two countries could negotiate a comprehensive trade deal. The deal triggered a relief rally in global stock markets as it averted the threat of a full-blown trade war.
Trump's allegations and US stance
On May 30, Trump wrote on his social media platform Truth Social, "China has completely violated the agreement with us. This is the result of being Mr Nice Guy!" He did not provide any concrete evidence, but US Trade Representative Jamieson Greer made it clear that China had delayed the removal of non-tariff barriers, especially export licenses for rare earth minerals.
Trump announced a global tariff hike on steel and aluminium from 25% to 50% on the same day, which he described as a move to strengthen the US steel industry. “We fulfilled our commitments, but China is slow to implement its commitments, which is unacceptable,” Greer told CNBC.
China's counter-reaction
China's Commerce Ministry said in a statement on Monday that the US has "seriously undermined" the Geneva agreement. The ministry accused the US of multiple violations, including a ban on microchips from Chinese tech company Huawei, cancelling visas for Chinese students, and blocking the sale of software design tools to Chinese firms. "The US' unilateral bullying policy is destabilizing the global supply chain," the ministry said.
China claimed it had lifted some tariffs and non-tariff measures imposed in response to Trump's "reciprocal tariffs" in April. Beijing demanded the US to "correct its mistakes" and respect the Geneva agreement, or else it would take "firm measures to safeguard its interests."
Background and global impact
The dispute is part of Trump's aggressive trade policy, which began with "reciprocal tariffs" declared at the White House as "Liberation Day" on April 2, 2025. Trump claimed his policy put the Chinese economy in "serious danger", following which a "rapid deal" was struck in Geneva. But on May 29, the US International Trade Court ruled many of Trump's tariffs illegal, although an appeals court temporarily reinstated it.
China had already described Trump's tariffs as "blackmail" and "economic bullying". At the World Trade Organization (WTO) in 2023, China called the US tariffs a violation of GATT 1994 rules.
Expert opinion and market impact
Analysts believe the dispute could increase volatility in the global supply chain, especially in key sectors such as semiconductors and rare earth minerals. According to a Reuters report, a shortage of rare earth magnets in the auto industry threatens to shut down factories. The S&P 500 index fell 0.3% on Friday after Trump's post, though it is up 5% since the Geneva deal. Uncertainty is growing among global investors, as Trump's policies and China's retaliatory actions are affecting global trade.
Conclusion
The tariff war between the US and China has again brought the global economy to the brink of uncertainty. The Geneva agreement, which raised hopes of a lasting trade deal, is now under threat due to mutual accusations from both sides. Will a possible dialogue between Trump and Xi Jinping break the deadlock, or will this dispute turn into a full-blown trade war? This question is crucial for global markets and diplomacy.
No comments: