On May 12, the U.S. and China issued a joint statement concerning recent trade negotiations and commitments made during talks in Geneva, marking a major positive signal for boosting the market. This statement signifies the establishment of a negotiation channel between the two countries and indicates that the darkest period of tariff tensions has passed. However, further consultations are still needed to reach a comprehensive bilateral economic and trade agreement.

The Geneva talks mainly addressed tariffs imposed after April 2.

First, let’s review the details of the reciprocal tariffs:

- On April 2, Executive Order 14257 imposed a 34% reciprocal tariff, comprising a 10% baseline tariff plus an additional reciprocal tariff of 24%.

- On April 8, Executive Order 14259 increased the reciprocal tariff by 50% to 84%.

- On April 9, Executive Order 14266 further raised the tariff rate from 84% to 125%.

According to the joint statement, the executive orders issued on April 8 and April 9 have been revoked, and the additional 24% tariff introduced on April 2 has been suspended.

During the 90-day pause period (until August 12, 2025), only the initial 10% tariff will remain in effect, effectively reverting tariffs to their early April levels. The new move eases trade pressures to some extent.

However, the statement did not address the issues on fentanyl-related tariffs or China’s retaliatory tariffs.

Now, let’s take a look at the tariffs on fentanyl:

- On February 1, Executive Order 14195 imposed a 10% additional tariff on fentanyl and its precursor chemicals listed under Harmonized Tariff Schedule (HTS).

- On March 3, Executive Order 14228 increased this tariff from 10% to 20%.

In summary, the tariff on fentanyl currently stands at 30%, including a prior 20% tariff and a temporary 10% tariff imposed in April.

Moving forward, the U.S. and China will enter a negotiation phase. During this period, exporters are expected to accelerate shipments, which may help to alleviate their inventory pressures. However, freight costs could increase due to shipping shortages. Given the unpredictability of U.S. tariff policies, the current 30% tariff represents only a recent additional levy. Since the trade war began in 2018, the U.S. has continually raised tariffs on China. Therefore, exploring emerging markets remains essential.