US, China reach 90-day tariff suspension deal: What it means for world economy

After intense negotiations in Geneva, the United States and China have agreed to a significant rollback and temporary suspension of tariffs, marking a crucial step towards de-escalating a that has unsettled global markets and disrupted supply chains.

The deal, announced on Monday, will see the US reduce its tariff rate on Chinese goods from 145 per cent to 30 per cent, while China will cut its tariffs on US imports from 125 per cent to 10 per cent for a period of 90 days.

The agreement emerged after two days of “productive” and “robust” talks between US treasury secretary Scott Bessent and Chinese vice-premier He Lifeng, alongside their respective trade representatives.

Both sides pledged to remove 91 percentage points of the tariffs imposed since early April and suspend a further 24 percentage points for the next three months. However, some tariffs, such as the 20 per cent duties imposed by the US to curb fentanyl imports, will remain in place.

A new mechanism for ongoing economic and trade consultations has been established to continue dialogue beyond this initial suspension, signalling a willingness to work through structural issues that have long plagued bilateral trade relations.

This tariff rollback is a major de-escalation in a trade conflict that had raised fears of a global economic downturn. The tit-for-tat tariffs, which had reached unprecedented levels, disrupted global supply chains, increased costs for businesses, and injected uncertainty into international markets. The deal is expected to ease inflationary pressures, revive cross-border trade, and boost investor confidence worldwide.

Bessent emphasised that neither side desires a decoupling of their economies, reflecting the deep interdependence between the two largest global economies. China’s Commerce Ministry welcomed the “substantial progress,” calling the move beneficial for both countries and the global community.

Experts suggest that the deal could stabilise global markets and provide a critical window for resolving deeper trade disputes, including issues around intellectual property, market access, and the US trade deficit with China.

What the deal means for India

India’s position in this evolving trade landscape is nuanced and carries both opportunities and challenges. During the height of the US-China tariff war, India benefited as American companies sought alternative suppliers to Chinese goods. This shift boosted Indian exports and opened avenues for deeper economic integration with Western markets.

India’s IT and technology services sectors stand to gain as US firms may accelerate outsourcing to India to mitigate risks associated with China. Agricultural exports could see marginal gains if China reduces its imports from the US, potentially creating openings for Indian farmers in commodities such as soybeans and cotton.

The rollback of tariffs could enable Chinese exporters, who maintain a technical and manufacturing edge, to reclaim lost market share in the US, potentially reducing demand for Indian exports in key sectors like non-leather footwear.

India’s manufacturing sector remains dependent on Chinese components, especially in electronics and pharmaceuticals, making it vulnerable to supply chain disruptions and increased costs if trade tensions resurface.

The potential return of Chinese goods to US markets at lower tariff rates threatens to shrink the window of opportunity India enjoyed during the tariff conflict, intensifying competition. Indian producers, particularly in steel, may face pressure as Chinese manufacturers look to offload excess inventory in alternative markets, potentially depressing domestic prices.

Experts caution that while short-term gains have been visible, India must accelerate structural reforms-such as improving infrastructure, skill development, and regulatory frameworks-to enhance competitiveness and capitalise on global trade realignments.

The US-China tariff truce underscores the complex interdependence of the two economies and the global economy’s vulnerability to their disputes. It reflects a pragmatic approach by both powers to avoid further economic damage amid rising geopolitical tensions and global uncertainties.

For India, the deal is a double-edged sword. While it may reduce some immediate export opportunities, it also highlights the need for India to deepen trade ties with Western economies and strengthen its manufacturing base to remain competitive in a shifting global order.

The coming 90 days will be critical in determining whether this temporary suspension evolves into a lasting resolution or if tensions flare up again, with significant implications for global economic stability and India’s growth trajectory.