Tariffs slashed, great news to celebrate!
On May 12, the results of the US-China trade negotiations in Geneva were announced today: significant tariff reductions!
Original news quote:
Foreign media reported that the US reduced tariffs on China from 145% to 30%, with another 24% temporarily suspended for 90 days. China reduced tariffs on the US from 125% to 10%, with another 24% temporarily suspended for 90 days.
However, Chinese media stated that in the reciprocal tariffs, the US cut to 10%, China cut to 10%, and both sides temporarily suspended another 24%.
Contradictory? How to understand?
Note that this is not contradictory. After Trump took office, the tariffs imposed on us were divided into multiple rounds:
a. February this year: Initially, using fentanyl as an excuse, a 10% tariff was imposed on Chinese exports to the US.
b. By March, another 10% was added, bringing the cumulative tariff rate to 20%.
This was the 20% tariff Trump imposed separately on China using fentanyl as an excuse before universally imposing "reciprocal tariffs" on global trade partners. Dolphin Research here briefly refers to it as the "fentanyl tariffs."
Then, in this wave of uniform global trade war, reciprocal tariffs were first imposed on China:
April 2: A 34% tariff was imposed on China (the one allegedly exported with one click in Excel)—bringing it to 54%.
April 8: Both sides retaliated, and the US added an additional 50% tariff, bringing the reciprocal tariff portion to 84% and the total tariff to 104%.
April 9: Escalation continued, with an additional 41% added to the reciprocal tariff on top of the 84%, bringing it to 125%. Combined with the fentanyl tariffs, the total reached 145%.
What is the actual negotiation result?
The current negotiation result is:
a. US to China: 1) Reciprocal tariff portion: The 40% and 50% retaliatory tariffs added on April 8 and 9 are completely canceled. Of the 34% tariff exported with one click on April 2, 10% remains, and 24% is temporarily suspended for 90 days to leave room for negotiation. 2) Fentanyl portion: The full 20% remains.
b. China to the US: Since it’s mainly reciprocal tariffs, China’s response is a one-to-one replication of the US’s actions. China has no other substantive universal tariffs on the US.
The final temporary result is, counting from Trump’s second term, the US imposes 30% + 24% (suspended) on China, and China imposes 10% + 24% (suspended) on the US.
How to interpret?
Clearly positive: With overall tax rates kept relatively low, the key is the 90-day suspension period. This is undoubtedly great news for global markets.
Of course, there will be ongoing tug-of-war, but in today’s globalized division of labor: rare earths vs. semiconductors, both sides still have cards to play.
The capital market will definitely celebrate with a rally. $Vista GLD(VGZ.US) $HSTECH ETF(03032.HK)
