The United States and China have reached a pivotal agreement to suspend tariffs for 90 days, marking a significant pause in the trade war that previously saw tariff levels escalate to over 100%.
Key Terms of the Agreement
Following weekend negotiations, both nations announced that tariffs imposed since April 2—previously amounting to 125% for imports into both countries—would largely be suspended. The agreement sets a 10% baseline tariff for each side, replacing the earlier exorbitant rates.
However, the U.S. will maintain a 20% tariff rate introduced earlier this year as part of measures addressing the fentanyl crisis.
As a result, U.S. tariffs on Chinese imports will now stand at 30%, while China's tariffs on U.S. goods are reduced to 10%.
The White House emphasized the significance of this development in a statement, highlighting the recognition of:
“The importance of their bilateral economic and trade relationship to both countries and the global economy.”
“The necessity of a sustainable, long-term, and mutually beneficial economic and trade partnership.”
Immediate Market Impacts
Ahead of this suspension, companies engaged in front-loading shipments, a strategy aimed at mitigating the effects of previous tariffs. Consequently, it is expected that inventories are well-stocked for the coming weeks, potentially stabilizing short-term supply chain disruptions.
However, industry stakeholders remain concerned about unresolved issues surrounding de minimis exemptions for parcels originating from China. While the agreement does not restore the exemption, it significantly reduces the duty rate on these shipments, offering partial relief.
Concerns from the Air Cargo Industry
The air cargo sector has voiced apprehensions about the broader implications of tariff adjustments and heightened customs scrutiny for e-commerce goods from China. These measures, coupled with the removal of the de minimis exemption, could trigger:
A collapse in shipment volumes.
An excess in capacity, disrupting market stability.
Recent data suggests that the transpacific market was already showing signs of stress, with declining demand and increased uncertainty prior to the agreement.
Next Steps in U.S.-China Trade Relations
The two parties have committed to establishing a mechanism for continued discussions aimed at resolving remaining trade disparities. This 90-day suspension is not the first of its kind; the U.S. previously implemented similar temporary tariff suspensions with other trade partners where imbalances existed.
As negotiations continue, this pause provides an opportunity for both nations to recalibrate trade policies and mitigate further economic disruptions.
Source: https://www.aircargonews.net/supply-chains/us-and-china-agree-to-90-day-tariff-suspension/1080093.article
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