In a surprise turn, U.S. President Donald Trump announced on May 12 that the United States and China had reached what he called a “total reset” in their relationship. This came after the two countries agreed to significantly reduce tariffs on each other’s goods for 90 days and committed to resuming trade talks in a newly cooperative spirit.
Standing at the White House podium, Trump struck a confident tone:
“We’re not looking to hurt China,” he said. “They were closing up factories. They were having a lot of unrest, and they were very happy to be able to do something with us.”
The numbers reflect a dramatic pullback from the “Liberation Day” tariffs imposed just last month. U.S. tariffs on Chinese goods — which had been raised to 145% — will now fall to 30%, while China will reduce its tariffs on U.S. imports from 125% down to 10%. The cuts are deeper than analysts had expected and take effect this Wednesday.
“I don’t think tariffs will go back up to 145%,” Trump told reporters, adding that “many other deals are coming in.”
But this deal isn’t just about tariffs. Trump emphasized that China has agreed to suspend all non-monetary trade barriers — a broad term often used to describe delays in licensing, bureaucratic restrictions, and hidden compliance hurdles that frustrate foreign companies trying to access the Chinese market.
“The best part of the deal is China agreeing to open up,” he said. “It will take a while to paper, but it’s happening.”
He also made it clear that pharmaceuticals are not included in this agreement, despite their central role in recent U.S. healthcare policy changes.
Fentanyl Clause and a Warning to the EU
Another striking feature of the deal was Trump’s decision to impose a 20% tariff specifically on fentanyl-related imports, adding that China had agreed to stop sending the synthetic opioid to the U.S. — a major step, given the drug’s deadly toll. In 2023 alone, fentanyl was linked to more than 74,000 overdose deaths, according to the CDC.
“They’ll be rewarded by not having to pay hundreds of billions in tariffs,” Trump said, referring to China’s cooperation on the fentanyl issue.
Trump also didn’t miss the chance to call out Europe. In a remark that may spark transatlantic tension, he stated:
“The EU is, in many ways, nastier than China.”
What the Deal Covers — and Doesn’t
Included in the Agreement:
- 90-day suspension of additional tariffs
- Significant cuts on both sides (U.S. → 30%, China → 10%)
- Halt on fentanyl chemical exports from China
- Removal of “non-monetary trade barriers” like licensing delays and administrative slowdowns
- Renewed dialogue between Trump and Xi Jinping by week’s end
Excluded from the Agreement:
- Pharmaceuticals
Trump clarified: “U.S.–China agreement doesn’t cover pharmaceuticals.”
Geopolitical and Strategic Implications
This deal represents not just a temporary trade pause but a potential reorientation of U.S.–China economic relations. The U.S. has long pushed China to open its markets, reduce unfair trade practices, and crack down on the export of illicit substances like fentanyl.
By agreeing to reduce tariffs and suspend non-tariff barriers, China is seen as conceding on issues it previously resisted. Meanwhile, Trump is presenting this as a “total reset” — not just a truce, but a turning point.
Bloomberg reports: Xi’s strategy of defiance seems to have paid off, as Trump agreed to a deeper rollback than initially expected.
What’s Next
- New trade negotiations are expected to continue during the 90-day window.
- Trump says more deals are coming and will meet with President Xi “maybe at the end of the week.”
- Markets are likely to remain volatile as each round of talks progresses and sectors react.
Still, the political signal is clear: after months of tension, the U.S. and China are stepping back from escalation, at least for now.
“It never made sense to me,” Trump said about the imbalance in trade openness. “We opened up to them, and they didn’t open up to us. It’s not fair.”
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
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