China and the U.S. have agreed to suspend the most aggressive elements of their tit-for-tat duty schemes, bringing tariffs down to the double-digits.
The White House on Monday released a statement indicating that the escalating “reciprocal” tariffs against China—including those levied on April 2, April 8 and April 9, totaling 115 percent—would be suspended for a period of 90 days, bringing the baseline duty rate down to 30 percent beginning Wednesday. The taxes on steel and aluminum announced before President Donald Trump’s “Liberation Day” tariff announcements will remain in place.
China will modify its own duty rate on U.S. goods to 10 percent as the two sides hammer out the details of the deal.
“We have to get it papered,” Trump said Monday at the White House, describing the state of the agreement. “But they’ve agreed to open up China.” The president said that the steep, 145-percent tariffs on Chinese goods and services will not resume after the 90-day pause even if the two sides cannot reach a permanent trade deal during that time, “But they would go up substantially.”
Markets rallied Monday upon the news of the tariff ceasefire, with the S&P 500 up 2.56 percent (145.17 points), the Dow Jones Industrial Average up 2.18 percent, or 897.7 points, and the Nasdaq Composite up 3.55 percent, amounting to 638.7-point growth. Nike and Amazon were among the day’s big winners, gaining nearly 8 percent on the Dow.
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U.S. trade associations welcomed the three-month pause on duties, but questioned whether the deferral would provide adequate relief to brands and retailers still contending with the impacts of the punitive duties on China levied during Trump’s first term.
“The 90-day pause is welcome and may temporarily help unstick the effective trade embargo that has been in place with respect to U.S.-China trade since April 9. Sadly, the residual 30 percent tariff, stacked on top of the existing Section 301 and ‘most favored nation’ (MFN) tariffs, will still make for an expensive back to school and holiday season for most Americans,” said American Apparel and Footwear Association president and CEO Steve Lamar. “If freight rates spike due to the tariff-induced shipping disruptions—which will take months to unwind—we could see costs and prices creep up even further.”
While the processing of containers at America’s busiest ports tanked during early May, shipping experts said Monday that they expect to see a surge in cargo as companies that were holding inventory overseas scramble to push it out ahead of the end of the deferral period. This could lead to a significant risk of bottlenecks and delays, they believe.
According to Lamar, whose organization represents dozens of enterprises of all sizes, like Adidas, Bloomingdale’s, Eileen Fisher, L.L. Bean, New Balance, Patagonia, Target and Skims, “What’s needed now is a long-term deal—not just with China but with all our trading partners—so we can predictably make long term trade, investment, and sourcing decisions.”
Footwear Distributors and Retailers of America (FDRA) president and CEO Matt Priest echoed the sentiments, saying that the group was “encouraged” by the administration’s progress and calling the negotiations “a good step toward easing tensions, which is important for American businesses and consumers.”
“But we’re not across the finish line yet,” Priest added. “Some shoes still face duties approaching 100 percent, and that’s unacceptable.”
In April, upwards of 70 FDRA members including Nike, VF Corp., Adidas, Deckers Brands, Puma, Skechers and Steve Madden signed an open letter to the president demanding a “more targeted approach [to tariffs], focused on strategic items rather than basic consumer goods.”
The trade group said footwear firms have been hit “particularly hard” by the duties because shoes already carry a “significant tariff burden.” Children’s shoes often have duty rates of 37.5 percent and higher, and the agreed-upon reciprocal duty rate of 30 percent will stack on top of the tariffs already in place.
“We’ve outlined clear, reasonable exemptions in our letter to the Administration, and we urge them to take action to ease the burden on Americans further,” Priest said Monday. “Our industry needs relief—and so do the families we serve.”