On May 12, China and the United States issued a joint statement on the Geneva Economic and Trade Talks. The spokesperson of the Ministry of Commerce said that the high-level economic and trade talks between China and the United States have made substantial progress and significantly reduced the level of bilateral tariffs. and issued the "Sino-US Joint Statement on Geneva Economic and Trade Talks" (hereinafter referred to as the "Joint Statement")

The talks achieved substantive results, with China and the United States communicating in many areas and reaching a series of important consensuses. What are the key signals? Jingtai has sorted it out for you.

What progress has been made in this negotiation?

According to the Ministry of Commerce, the talks between China and the United States were very successful – candid, in-depth and constructive, and a series of important consensus was reached. The most exciting thing is that the talks have made substantial progress in reducing bilateral tariffs!

Specifically, the two sides committed to take the following actions by May 14, 2025:

The United States will (i) amend the ad valorem tariffs imposed on Chinese goods (including Hong Kong SAR and Macao SAR goods) under E.O. 14257 of April 2, 2025, of which 24% of the tariffs will be suspended for the initial 90 days, while retaining the remaining 10% of the tariffs imposed on these goods as provided for in the E.O.; (ii) Cancel the additional tariffs imposed on these goods pursuant to E.O. 14259 of April 8, 2025 and E.O. 14266 of Apr. 9, 2025.

China will (1) revise the additional ad valorem tariffs on U.S. goods as stipulated in Tariff Commission Announcement No. 4 of 2025 accordingly, of which 24% of the tariffs will be suspended for the first 90 days, while retaining the remaining 10% of the tariffs on these goods, and cancel the additional tariffs on these goods in accordance with Tariff Commission Announcement Nos. 5 and 6 of 2025; (2) Take necessary measures to suspend or cancel the non-tariff countermeasures against the United States from April 2, 2025.

Both China and the United States have eliminated 91 percent of the tariffs and suspended the 24 percent "reciprocity tariffs," which is a huge step forward. This series of measures is not only in line with the expectations of producers and consumers in China and the United States, but also beneficial to the global economy. After all, there are no winners in a trade war, and only win-win cooperation can truly benefit all parties.

How can this negotiation achieve such a good result? Bai Ming, a researcher at the Academy of International Trade and Economic Cooperation of the Ministry of Commerce, gave his opinion: "This is due to the effective performance of our representatives in the negotiations and the resolute protection of their legitimate rights and interests. At the same time, the pressure within the US side has also forced them to put down their posture and sit down for serious talks. ”

In other words, the success of this negotiation is the result of the joint efforts of two parties: China's firm position: our negotiating team sticks to the bottom line and ensures that national interests are not harmed; The pressure on the US side is high: The US faces domestic challenges, such as inflation and supply chain issues, which have forced them to reconsider their relationship with China.

How will the negotiations develop in the future?

Next, let's talk about the two main lines of future Sino-US negotiations, and make some analysis in combination with the US-UK agreement to see how these negotiations may develop.

Future U.S.-China negotiations are likely to focus on two main lines:

Main line 1: Negotiations on trade and market access in the broad sense

This main line is mainly aimed at the 24% tariff that has been suspended. At the heart of the negotiations is how to expand market access and reduce non-tariff barriers to promote fairer and more transparent bilateral trade.

Main line two: fentanyl negotiations

The other thread is about fentanyl, which involves a 20% tariff. This problem may be easier to solve than the first main line, especially with DEA Director Terry Cole is about to take office — he passed the Senate hearing on April 30.

Next, we can better understand the complexity of the U.S.-China negotiations through the framework of the US-UK agreement. From three perspectives:

1. Benchmark equivalent tariff (10%)

First, the 10% benchmark equivalent tariff may be difficult to eliminate. Even the United Kingdom, which has a basic balance of trade with the United States, has not been "spared", so it may not be so easy for China to remove this part of the tariffs.

2. Tariff portion higher than 10%.

Second, for the reciprocal tariff portion of more than 10%, the negotiations will be more complex and time-consuming. This will require negotiations in exchange for greater market access, lower non-tax barriers, and exchange rate adjustments. These types of negotiations often involve multiple stakeholders and are therefore expected to be time-consuming and laborious.

3. Industry tariff level

Finally, at the level of sectoral tariffs, the UK's experience may not be applicable to China. Due to the different security considerations of different countries, especially in the tariff setting of some sensitive industries, the situation in China and the UK is quite different. For example, certain industries are seen as critical areas in China, and tariff policies are likely to give more consideration to national security considerations.

What will be the impact on domestic exports after the issuance of the joint statement?

Prior to the joint statement, exports to China were virtually untradable to the U.S., given the new 145% tariffs imposed by the U.S. on China (including a 20% fentanyl tariff and a 125% reciprocal tariff): high tariffs made direct exports to the U.S. very difficult; Transit rush: Transit through other countries to circumvent some tariffs as a hedge against the decline in exports to the United States.

However, with the recent progress of the "30% tariff retained", the situation may improve, and while China's exports and nominal GDP will still be dragged down somewhat year-on-year (about 5.5 percentage points and 1 percentage point, respectively), the negative impact has been significantly lessened compared to the previous "145% tariff" scenario. Specifically, there are the following key points:

1. The downside risk of exports to the United States has been fully released

First, the downside risks to exports to the U.S. have been fully unleashed in April. According to estimates, the 30% increase in tariffs would reduce exports to the United States by about 37.4 percentage points year-on-year, and actual data for April already showed that exports to the United States fell by more than 30 percentage points year-on-year. In other words, the worst is behind us.

In the next 90 days, exports to the United States are expected to show a trend of marginal recovery. While it is unlikely to return to previous levels all at once, at least it will not continue to deteriorate.

2. The momentum of the revolving port is weakened but will continue

Second, while the "30% tariff" is still higher than the US tariff exemption for other countries (usually 10%), it means that the momentum of "re-exporting" will weaken somewhat, but it will not disappear completely.

To put it simply, companies will still try to use Southeast Asia and other places for entrepot trade to reduce the burden of tariffs. However, the pressure is less than the previous sense of urgency in the face of the high tariff of 145%.

Jingtai summarizes the information released by this meeting:

1. From "almost untradable" to "expected to maintain positive growth": As tariffs have been significantly reduced from 145% to 30%, the risk of exports to the United States has been released, and it is expected to be gradually restored in the next 90 days;

2. It is still important to grab entrepots: although tariffs have been reduced, companies will still use entrepot trade to further reduce costs, but the intensity may not be as great as before;

3. Weakening overall economic impact: Although there is still a 5.5 percentage point drag on exports and a 1 percentage point drag on nominal GDP, it has been greatly eased compared with previous expectations.

For investors, this means that we can breathe a sigh of relief, but not to be taken lightly. Future negotiations and market changes remain uncertain and require continued attention.