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Trade policy

US and China Call 90-Day Truce in Trade War, Temporarily Lowering Tariffs

Strategic Insights

— 1 min read

US and China have agreed to a 90-day truce in their trade war, temporarily reducing tariffs on each other's imports. The move is a significant relief for small businesses and millions of workers on both sides of the Pacific, who have been hurt by the tariffs. The truce is a sign that despite their strongmen image, President Donald Trump and Chinese President Xi Jinping are willing to find common ground and avoid a complete embargo, which would have devastating consequences for both economies.

Key Takeaways:

  • US levies on most Chinese imports will be reduced to 30% from 145%, while Chinese duties on US goods will drop to 10% from 125%.
  • The agreed tariff reductions are expected to benefit small businesses, which account for almost 80% of job openings in the US.
  • About 16 million jobs could be at risk in the US due to Trump's tariffs, according to Goldman Sachs Group Inc. estimates.
  • China's unemployment insurance covers about 244 million, and payouts to the jobless rose by 22.4% to 46.5 billion yuan ($6.4 billion) in the first quarter.
  • The April PMI reading on new export orders plummeted to a three-year low, indicating further trouble to come.
  • Relocating low-skilled manufacturing workers into services won't be easy, as popular gigs such as ride-hailing drivers are already getting crowded.
  • China's entire 425-million-strong blue-collar class will feel the heat regardless of whether their line of work is directly exposed to trade wars.
  • Trump's maximalist approach on tariffs is steadily destroying a healthy labor market, with small businesses facing impossible ordeals in switching production to other countries.

Statistics:

  • US levies on most Chinese imports: 145% to 30%
  • Chinese tariffs on US goods: 125% to 10%
  • Estimated job losses in the US: 16 million
  • China's unemployment insurance payouts: 46.5 billion yuan ($6.4 billion), a 22.4% increase in the first quarter
  • April PMI reading on new export orders: three-year low
  • Number of ride-hailing drivers in China: 38 million (a 27% increase last year)
  • China's blue-collar workforce: 425 million

Sources:

  • Goldman Sachs Group Inc. estimate on job losses in the US due to tariffs
  • Chinese government data on unemployment insurance payouts
  • Bloomberg article on Chinese PMI reading on new export orders
  • Economic news on increasing number of ride-hailing drivers in China

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