U.S., China to slash tariffs for 90 days... The U.S. and China have agreed to dramatically reduce tariffs on each other’s goods for a 90-day period following high-level talks in Geneva. U.S. tariffs on Chinese imports will drop from 145% to 30%, while Chinese tariffs on U.S. goods will be reduced from 125% to 10%. The tariff reductions take effect on Wednesday and apply to most of the duties imposed in April, covering a wide range of consumer and industrial goods.
“After taking the aforementioned actions, the parties will establish a mechanism to continue discussions about economic and trade relations,” a joint statement said, adding this dialogue would be led by Chinese Vice Premier He Lifeng, U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer.
Bessent said, “We both have an interest in balanced trade, the U.S. will continue moving toward that. He noted, “We have a very good mechanism to avoid unfortunate escalations happening again,” adding the “consensus from both delegations is that neither side wanted a decoupling.”
Negotiators agreed to meet regularly over the next three months, with Geneva serving as one of several rotating venues for the talks. The spotlight now shifts to whether both sides can convert the 90-day window into a durable deal.
“I would imagine that in the next few weeks we will be meeting again to get rolling on a more fulsome agreement,” Bessent told CNBC. He referenced a return to the Phase One Agreement reached during the first Trump administration that included purchase targets by China that were not met.
Bessent also said it would be “implausible” for U.S. tariffs on China to go below 10%.
Of note: Bessent said there was no discussion about currency during the talks. Greer said talks on fentanyl tariffs are on a separate track and are “positive.” Bessent said the U.S. sees the possibility of purchasing agreements with China.
Impacts from U.S., China trade war de-escalation... Bloomberg Economics said it has crunched the numbers on the U.S./China 90-day tariff reduction agreement and the main takeaway is that the new rates halve the stagflation hit to the U.S. economy. It said the new rate on China means the shock to the average effective tariff rate on all U.S. imports is now 10.4 percentage points, down from 20.3 percentage points. Applying model estimates used by the Fed in the first trade war, the group expects that could translate into a 1.5% hit to GDP and 0.9% boost to core PCE over a period of two to three years.
Tai Hui, APAC chief market strategist at J.P. Morgan Asset Management, says: “The magnitude of this tariff reduction is larger than expected. This reflects both sides recognizing the economic reality that tariffs will hit global growth and negotiation is a better option going forward. The 90-day period may not be sufficient for the two sides to reach a detailed agreement, but it keeps the pressure on the negotiation process. We are still waiting for further details on other terms of this agreement, for example, whether China would relax on rare earth export restrictions. Overall, we expect the market to get back on to a risk-on sentiment in the near term. Pressure on the Fed to cut rates may also ease for the time being.”
According to ING Economics, the reduction of tariffs on China back to 30% “is a sufficient enough reduction to allow for a more or less return of normal trade — at this level, we suspect exporters, importers, and consumers will share in absorbing the impact of the tariffs, and overall business will likely resume. Looking back, the 20-30% tariff level through the first quarter saw exports to the U.S. rise around 5.0% YoY, though this may be skewed to the upside due to trade frontloading. In terms of impact on China’s growth, the 90-day ceasefire will upgrade our second and third quarter growth outlook. We suspect that China’s May and June exports to the US will bounce back sharply as importers with depleted inventories will take advantage of the ceasefire to resume imports. Depending on how talks proceed, we could see a frontloading of exports again in July and August, especially if there is not much clarity on a longer-lasting bargain being struck heading into the later stages of the 90-day period. We are reverting our forecast for the year back to 4.7%, with further upside possible if a bilateral agreement is reached within the 90-day period.”
Japan signals increasing corn imports as part of U.S. trade talks, won’t bend on auto tariffs... Japanese Prime Minister Shigeru Ishiba signaled that increasing corn imports from the U.S. would be among options in trade negotiations with Washington, but warned Japan would never sacrifice its agriculture industry to obtain lower auto tariffs. Japan has made little headway in two rounds of trade talks with the United States. Agreeing to buy more corn is a less controversial option for Japan than increasing rice imports.
Japan’s top trade negotiator, Ryosei Akazawa, said he won’t waver in his demand for the U.S. to eliminate all the tariffs imposed by the Trump administration.
U.S. suspends Mexican live animal imports over screwworm threat... USDA Secretary Brooke Rollins on Sunday announced the suspension of live cattle, horse and bison imports through ports of entry along the U.S./Mexico border in response to the rapid northward advance of the New World Screwworm (NWS) in Mexico. The ban comes as new detections were confirmed as far north as Oaxaca and Veracruz — just 700 miles from the U.S. border. Despite joint eradication efforts with Mexico, Rollins called the screwworm’s continued spread “unacceptable” and said the move is necessary to protect U.S. livestock and national food security.
USDA is deploying Tick Riders – horse-mounted patrol inspectors – to monitor livestock and wildlife along the southern border for signs of infestation.
Mexican Ag Minister Julio Berdegue swiftly rebuked the action, but said he hoped the two countries could soon come to an agreement over the pest.
House Ag Committee to launch high-stakes budget reconciliation markup... The House Ag Committee will begin its markup of the budget reconciliation package on Tuesday evening. The committee is under pressure to identify $230 billion in cuts over the next decade, with major changes proposed to nutrition assistance, farm safety nets, and agricultural trade programs.
Key policy fights:
- SNAP overhaul: Proposed changes would limit future benefit increases, add stricter work requirements, and shift up to 25% of program costs to states — a sharp departure from current federal funding levels. Democrats and anti-hunger advocates warn of harm to vulnerable populations.
- Farm programs: The markup includes up to $70 billion in higher reference prices (and possibly a boost in farmer payment caps) and expanded crop insurance — mostly mirroring Chairman Glenn “GT” Thompson’s (R-Pa.) previous farm bill draft — but offsets may require deep cuts elsewhere, complicating consensus.
- Trade promotion: Lawmakers are pushing for more funding to counter a nearly $50 billion ag trade deficit. However, structural trade issues persist.
More than 160 farm and nutrition groups have criticized the reconciliation strategy, warning that bypassing a full farm bill process could erode long-term policy stability and bipartisan cooperation.
Amendment votes will dominate Wednesday’s session, with intense GOP/Democratic negotiations expected. The outcome could redefine the federal role in both agriculture and food security for the next decade.
Clean energy tax credits face uncertain future in GOP tax bill... House Republicans are advancing a sweeping tax and spending bill that could significantly scale back or reshape some of the clean energy tax credits established under the Inflation Reduction Act (IRA). These credits — worth hundreds of billions of dollars — have become a major flashpoint in ongoing GOP budget negotiations.
Key proposals under consideration
- Immediate repeal: EV tax credits could be repealed as early as Dec. 31, reflecting strong GOP opposition.
- Phased rollbacks: Credits for solar, wind and other renewables may face gradual phase-outs, though timelines remain undecided.
- Transferability & foreign ties: Proposed changes would eliminate the ability to sell credits to third parties and ban eligibility for projects linked to China, Russia and other foreign adversaries.
The GOP remains split. While hardliners are pushing for full repeal, over 20 Republican lawmakers support retaining select credits to protect jobs and investments in renewable-heavy districts.
Developers and investors face growing uncertainty, though credits for existing projects are unlikely to be revoked retroactively.