When two of the largest retailers in the United States warn that shelves may soon be empty, it signals that something deeper is amiss in global trade dynamics. On Monday, the United States and China announced a 90-day truce on tariffs after hurried negotiations in Geneva. But this deal, described as “historic” by President Donald Trump and hailed as a sign of “defiance” by China’s leadership, is not a resolution—it is merely a pause, born out of economic compulsion and mounting pressure on both sides.
Mounting Economic Pressures on Both Sides
Despite public posturing, both President Xi Jinping and President Trump are acutely aware of the vulnerabilities in their respective economies. In the U.S., stock markets have punished tariff hikes repeatedly, pushing the administration to reverse course just days after imposing them. The American economy contracted for the first time in three years during the first quarter of 2025. With a looming recession, surging bond yields, and a record trade deficit, the Trump administration had little choice but to de-escalate.
China, on its part, is facing significant headwinds. Its manufacturing PMI dropped to a 16-month low in April, and consumer prices have declined for two consecutive months, reflecting tepid domestic demand. Despite Beijing’s measures to stimulate consumption, results have been underwhelming. Major American corporations with deep stakes in China—Apple, Tesla, and Amazon—have felt the tremors, further intensifying calls for a truce.
The Terms of the Temporary Deal
Announced in Geneva by U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer, the agreement rolls back reciprocal tariffs by 115 percentage points. U.S. tariffs on Chinese goods drop from 145% to 30%, while China’s levies on American imports fall from 125% to 10%. Additionally, both sides agreed to suspend 24% of pending tariffs during the 90-day consultation period. This rollback is significant, though still short of returning to pre-trade war norms.
China’s Commerce Ministry emphasized that the agreement aligns with the needs of producers and consumers in both countries. However, skepticism remains. During Trump’s first term, China committed to purchasing $200 billion in U.S. goods by the end of 2021, yet fulfilled only 58% of that promise. Such unfulfilled commitments have left many U.S. officials and foreign executives wary of Beijing’s reliability, labeling it a case of “promise fatigue.”
A Pause Driven by Market Sentiment, Not Resolution
Markets reacted positively to the announcement. The S&P 500 and Dow Jones futures surged over 2%, while global indices rallied. Oil prices spiked, and the dollar saw gains against major currencies. However, the market’s response stems from relief rather than optimism. Wall Street had been starving for positive news amid weeks of volatility, and the truce—albeit temporary—offered just that.
Nevertheless, financial institutions remain cautious. Goldman Sachs slightly reduced its recession probability from 45% to 35%, but still forecasts a downturn. Many economists and business leaders question whether this pause will lead to lasting peace. The European Chamber of Commerce in China noted that while the tariff rollback is a positive development, 90 days of talks may not resolve entrenched structural issues.
Uncertainty Lingers Beyond the Geneva Agreement
The deeper challenges of intellectual property rights, market access, and regulatory barriers remain untouched. If no permanent deal is reached in 90 days, tariffs may snap back, reigniting the trade war. Businesses and investors alike are bracing for further volatility. While the screens on Wall Street are green for now, the road ahead is far from clear.
The agreement in Geneva may have averted an immediate trade catastrophe, but it is merely a timeout in a long and bruising economic duel. As both nations jockey for global supremacy, the tariff war has only reached an interval—not the end.
