US, China extend tariff truce, calming tensions

The United States and China have announced to extend the suspension of 24 percentage points of reciprocal tariffs on each other's goods for another 90 days, starting August 12, 2025, in a move seen as an effort to stabilise strained economic ties between the world's two largest economies.

The decision, announced in a joint statement on Tuesday, followed talks in Stockholm on July 28-29 led by Chinese Vice Premier He Lifeng, US Treasury Secretary Scott Bessant, and US Trade Representative Jamison Greer. It builds on commitments made during earlier rounds in Geneva on May 12 and London on June 9-10, under a negotiation framework designed to manage disputes without escalating into a trade war.

Under the arrangement, both sides will retain a 10% tariff on a range of goods while continuing to suspend an additional 24% ad valorem tariff. The US suspension applies to imports from mainland China as well as Hong Kong and Macao. In Washington, the move modifies measures introduced under Executive Order 14257 of April 2, 2025, which had imposed steep tariffs as part of a broader economic pressure strategy. Beijing will amend its counter-tariff measures, first announced under Tax Commission Announcement No 4 of 2025, and pause certain non-tariff actions in line with the Geneva declaration.

While markets and manufacturers welcomed the extension, analysts stressed it is more of a ceasefire than a breakthrough. "This is not a peace treaty; it's a ceasefire," said an international trade analyst in Washington. "Both governments are buying time to keep talks alive, but the fundamental differences are still there."

The extension comes as both economies confront domestic headwinds. The US is grappling with slowing growth, high borrowing costs, and a politically charged election season in which trade with China is a divisive issue. China is contending with a sluggish post-pandemic recovery and a troubled property sector.

"Neither side can afford a new tariff escalation right now," a Beijing-based economist said, framing the move as a pragmatic step driven by necessity rather than a convergence of political visions. For Washington, the truce could help avoid adding price pressures for consumers and businesses. For Beijing, it may shore up investor confidence and secure export markets.

Chinese Vice Premier He Lifeng emphasised during the Stockholm talks that a stable, healthy, and sustainable China-US economic relationship serves not only the two countries' respective development goals but also contributes to global economic growth and stability.

Since their imposition in repeated tit-for-tat fashion, tariffs have increased costs for consumers and businesses, disrupted supply chains, and added long-term uncertainty that has dampened innovation and investment. Although some US politicians argue that tariffs bring in revenue, economists argue that the gains are outweighed by reduced economic output and slower growth.

The tariff truce, first agreed earlier this year, rolled back triple-digit rates to more manageable levels, calming tensions in sectors such as electronics, machinery, and agricultural goods. US importers and Chinese exporters alike have used the pause to stabilise contracts, manage inventories, and adjust pricing strategies.

The Sweden talks hold significance far beyond bilateral trade. Both economies remain deeply intertwined despite strategic rivalry, and their decisions ripple through global supply chains and commodity markets. Countries in Asia and Europe linked to the two economies could see short-term stability as a result of the pause in tariff escalation.

"Reducing tariffs and stabilising trade is not a zero-sum game," said a Beijing-based trade researcher. "It's a foundation for sustainable growth benefiting workers, consumers, and producers on both sides."