US–China 90-Day Tariff Truce: Duties Drop from 145% to 30%, Markets Surge 3.3%

On May 12, after two days of negotiations in Geneva, the US and China announced a 90-day tariff truce: American tariffs on Chinese imports fell from 145% to 30%, and Chinese duties on US goods fell from 125% to 10%. Beijing also suspended non-tariff retaliatory measures — rare-earth export restrictions and regulatory investigations targeting US companies. The S&P 500 surged 3.3% (Dow +1,160 points, Nasdaq +4.3%) in the strongest single-day gain in months.

Why 145% tariffs were effectively an embargo

To understand the significance of the deal, consider what 145% actually means. A US retailer buying goods from a Chinese manufacturer at $10 per unit would owe an additional $14.50 in tariffs at the border — before logistics, insurance, or margin. Most goods could not cross profitably. Since early April, bilateral trade volumes had collapsed sharply as companies either stockpiled inventory or scrambled to reroute supply chains.

The new structure:

• US → China: 30% base tariff (down from 145%)
• China → US: 10% (down from 125%)
• Additionally: China lifts rare-earth export restrictions and drops regulatory pressure on US firms

For context, 30% is still higher than pre-escalation tariff levels, but it is a level at which most goods can be traded profitably. The embargo is over; the trade tension is not.

Who won the most on the day

The obvious beneficiaries are companies most dependent on Chinese goods or the Chinese market:

• Amazon +8.1% — the largest marketplace for Chinese sellers in the US
• Carnival +9.6% — lower geopolitical tension signals a rebound in discretionary spending
• Best Buy +6.6% — consumer electronics and appliances are overwhelmingly manufactured in China

The broader market rally reflects a reduction in the "tariff risk premium" — uncertainty that investors had been pricing into all assets from fear of endless escalation.

The 90-day clock: three possible endings

A truce is not a deal. It sets a 90-day negotiating window. By roughly mid-August 2026, one of three outcomes becomes likely:

Scenario 1 — a full deal. Tariffs fall further or are locked in at the new levels. The most bullish outcome: eliminates uncertainty, reduces inflation, and gives the Fed room to ease.

Scenario 2 — extension of the truce. The window is extended; the status quo is preserved. Markets continue operating under tense ambiguity.

Scenario 3 — snapback to 145%/125%. If negotiations break down. A sharp and painful shock for equities, especially tech and consumer discretionary.

Alongside the truce, Trump is flying to Beijing May 13–15 for a summit with Xi Jinping — his first since 2017 — with Elon Musk, Tim Cook, and Larry Fink in the delegation. The Geneva truce appears to have been timed to give both sides a positive signal before entering the summit room.

What the truce does not cover

This agreement leaves several major issues untouched:

• Sector-specific tariffs — 25% on steel, aluminum, and automobiles remain in place
• Intellectual property disputes — the core structural grievance driving the US–China trade conflict
• Taiwan — the geopolitical tension around the island has not diminished
• Other trading partners — tariffs on Mexico, the EU, and Southeast Asia are separate topics entirely

Practical takeaway for investors

A trader reacts to the truce instantly. A long-term investor watches three things:

1. The ~August 17, 2026 deadline — when it becomes clear whether the pause evolves into a durable agreement
2. The inflation effect — lower tariffs are disinflationary; if CPI starts to slow, the Fed gains room to cut rates in 2026–2027
3. Sector exposure — retail and consumer electronics gain most; strategic sectors (steel, semiconductors, defense) operate under different tariff regimes this truce does not touch

---

Sources: CFR — US and China slash tariffs · PBS — Dow leaps 1,100 points · J.P. Morgan — what investors need to know