The U.S. and China recently hit pause on their escalating trade war, announcing a 90-day tariff truce after intense negotiations in Geneva. This temporary rollback of sky-high import duties offers businesses and investors a moment to breathe. Yet, the underlying tensions fueling this conflict remain unresolved, leaving global markets and supply chains in a state of flux. This article breaks down the truce, its economic ripple effects, and what lies ahead for businesses navigating this volatile landscape.
Why the Tariff Truce Matters
The U.S.-China trade war, reignited in early 2025, saw tariffs soar to unprecedented levels. U.S. duties on Chinese goods peaked at 145%, while China retaliated with matching rates. These measures disrupted supply chains, spiked costs for businesses, and threatened economic stability. The truce, finalized on May 11, 2025, slashes U.S. tariffs to 40–60% and lowers Chinese duties, offering temporary relief. But with only 90 days to negotiate a lasting deal, uncertainty looms large.
This truce answers a key question: Can the U.S. and China avoid economic decoupling? For now, it signals a willingness to talk, but the road ahead is fraught with challenges. Businesses, from small retailers to global manufacturers, are watching closely.
The Economic Fallout of the Trade War
Before the truce, the trade war wreaked havoc. U.S. tariffs, initially raised to 10% under the International Emergency Economic Powers Act (IEEPA) in January 2025, escalated to 34% by April. China mirrored these hikes, targeting U.S. agricultural exports. By early May, both nations imposed reciprocal 125% tariffs, causing a sharp drop in bilateral trade.
The impact was immediate:
- Supply chain chaos: Ports like Los Angeles saw a surge in empty container returns as shippers braced for prolonged disruptions.
- Business losses: Small businesses canceled orders and laid off workers, unable to absorb skyrocketing costs.
- Consumer pain: Retailers warned of inventory shortages, with prices for goods like electronics and clothing set to rise.
Jay Foreman, CEO of Basic Fun, a toy manufacturer, summed it up: “We went from thriving to surviving overnight.” His company faced effective tariff rates of up to 58%, even after the truce.
How the Truce Changes the Game
Negotiations led by U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng produced the 90-day truce, resetting tariffs to more manageable levels. Global markets responded with enthusiasm:
- The S&P 500 jumped over 3%.
- The Nasdaq surged 4%, entering bull market territory.
- Economic forecasts now suggest the U.S. might dodge a recession in 2025.
Yet, the relief is tempered. Current U.S. tariffs, averaging 41%, remain far above the 11% pre-2025 levels. China’s duties, now around 28%, also exceed their previous 14% average. Compounded tariffs on specific goods—like steel, aluminum, and products under Section 301—still burden importers.
Logistics firms face their own hurdles. Brian Bourke of SEKO Logistics noted, “Vessel cancellations and rerouted ships have created a bottleneck. It’ll take weeks to stabilize.” Analysts predict a 4–6 week lag before trade flows normalize, with freight prices likely to spike in the interim.
What’s Driving the Uncertainty?
The truce doesn’t resolve the core issues fueling the trade war:
- Unfair trade practices: The U.S. cites China’s industrial subsidies and intellectual property issues as justification for tariffs.
- National security concerns: Sector-specific tariffs on steel, aluminum, and critical minerals reflect U.S. priorities.
- Reciprocal tariffs: A 10% baseline tariff on all U.S. imports, including from free-trade partners, adds complexity.
Scott Kennedy, a trade expert at the Center for Strategic and International Studies, warns, “This truce buys time, but the U.S. hasn’t clarified its endgame—fair competition or full disengagement?” Without a clear strategy, businesses face ongoing risks.
Navigating the New Tariff Landscape
For businesses, the tariff regime remains a maze. Drew Cleaver, founder of Higher Hangers, relies on AI tools to calculate duties, which range from 48% to 58% for his products. “It’s a constant guessing game,” he says. “Even with lower tariffs, we’re barely breaking even.”
The complexity stems from layered tariffs:
- A 20% IEEPA tariff applies to all Chinese imports.
- A 10% reciprocal tariff adds to the burden.
- Sector-specific tariffs (e.g., 25% on steel) push rates higher for certain goods.
Customs updates, often issued hours before implementation, further complicate compliance. Firms must adapt quickly or face delays and penalties.
What’s Next for Global Trade?
The 90-day window is a critical test. Negotiations will tackle unresolved issues from the 2020 Phase One deal, including market access and subsidies. Failure to reach a lasting agreement could trigger renewed tariff hikes, with rates potentially exceeding 60% on Chinese goods.
Other nations are also affected. The U.S.’s 10% reciprocal tariff on all imports has strained relations with free-trade partners. Planned 40% tariffs on Asian exporters, set for July 2025, may be reconsidered, but even a 10% rate erodes margins for many.
Strategies for Businesses
To navigate this uncertainty, businesses can:
- Diversify supply chains: Source from countries like Vietnam or Mexico to reduce reliance on China.
- Leverage technology: Use AI-driven tools to track tariff changes and optimize logistics.
- Plan for volatility: Build cash reserves to weather potential tariff spikes.
Looking Ahead
The U.S.-China tariff truce offers a glimmer of hope, but it’s no cure-all. While markets celebrate the rollback, businesses face elevated costs and logistical hurdles. The next 90 days will determine whether this pause leads to a lasting deal or renewed escalation. For now, firms must stay agile, balancing optimism with caution.
As Scott Bessent noted, “Economic decoupling benefits no one.” Yet, without progress on core issues, the trade war’s shadow will linger, reshaping global trade for years to come.
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Other nations, facing 10% US tariffs despite free trade agreements, watch closely. Asian exporters, slated for 40% tariffs in July, hope for relief. However, even a 10% duty erases margins for many, reshaping global trade strategies.
Actionable Steps for Businesses
Navigating this uncertainty requires proactive measures:
- Reassess Supply Chains: Diversify sourcing to countries like Vietnam or Mexico to reduce reliance on China.
- Monitor Policy Changes: Check US Customs and Border Protection updates daily, as tariff shifts often come with little notice.
- Leverage Technology: Use AI tools to calculate effective duties and optimize pricing.
- Engage in Advocacy: Join trade groups to influence policy during the 90-day window.
Conclusion: Prepare for Ongoing Volatility
The US-China tariff truce is a step toward stability, but it’s not a cure-all. Elevated tariffs, supply chain bottlenecks, and unresolved disputes keep businesses on edge. By staying informed and agile, firms can mitigate risks and seize opportunities. Monitor negotiations closely—the next 90 days will shape global trade’s future.
