The U.S. and China strike a temporary tariffs deal

Summary

Marketplace Morning Report: The U.S. and China Strike a Temporary Tariffs Deal

Release Date: May 12, 2025
Host: Liana Byrne
Guests: Mariko Oi (BBC World Service), Samir Hashmi (BBC)

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U.S.-China Temporary Tariffs Agreement

The episode opens with Liana Byrne reporting on a significant development in the ongoing U.S.-China trade tensions. A temporary agreement has been reached to reduce tariffs, signaling a potential thaw in the escalating trade war between the two economic giants.

Details of the Agreement:

• Tariff Reductions: Both the United States and China have agreed to cut tariffs by a total of 115%. Specifically, the U.S. has lowered tariffs on all Chinese goods from 145% to 30%, while China has reduced its levies on U.S. products to 10% (01:42).
• Duration: The agreement is set to last for 90 days, acting more as a pause than a permanent resolution, giving both nations a window to negotiate a more comprehensive trade deal (01:42).

Market Reactions: Mariko Oi from the BBC World Service, based in Singapore, provides insights into the immediate market responses to the announcement. "The Chinese market, the Hong Kongese market have reacted positively… it is a lot bigger cut than what some experts were expecting, which is why we saw that jump in the stock market, especially in Hong Kong and mainland China," she explains (02:46).

China's Economic Challenges: Despite the positive market response, China's economy continues to face significant pressures. Deflation remains a critical concern, with factory prices experiencing the steepest decline in six months as of April. Mariko Oi highlights, "Even though Beijing has been trying many measures to stimulate the economy, the fundamentals of the Chinese economy remain quite weak. This trade war is not going to help" (03:17).

Global Economic Updates

Beyond the U.S.-China trade dynamics, the report touches on other notable global economic stories:

• Saudi Aramco Profits: Saudi Aramco, the world's largest oil company, reported a nearly 5% drop in profits last quarter due to weaker demand and rising operational costs.

• India’s Pharmaceutical Sector: Pharmaceutical stocks in India have declined following President Trump's pledge to cut drug prices by 30 to 80%, aligning them with prices in other wealthy nations.

President Trump's Middle East Tour

A significant portion of the episode focuses on President Donald Trump's first foreign visit of his term, encompassing Saudi Arabia, Qatar, and the United Arab Emirates from May 13 to May 16. The primary objectives of this tour include securing major investments and advancing defense deals.

Investment Initiatives: Samir Hashmi from the BBC elaborates on the ambitious investment pledges from Gulf nations. "Saudi Arabia has pledged to invest $600 billion over the next four years, and the United Arab Emirates has committed $1.4 trillion over the next decade," he states (05:22). However, Karen Young from the Middle East Institute cautions that these figures represent long-term strategic investments rather than immediate capital influxes (05:42).

Defense Deals: Defense remains a high priority during Trump's visit. Historically, the U.S. has been a major arms supplier to Saudi Arabia. Following restrictions imposed after the 2018 murder of journalist Jamal Khashoggi, these deals have faced increased scrutiny. "President Trump is expected to propose a new $100 billion weapons package," Samir Hashmi notes (05:53). Saudi commentator Ali Shihabi emphasizes the need for firm assurances that these deals will proceed smoothly this time (06:28).

Strategic Implications: The visit is seen as a strategic reset of Saudi-U.S. relations, aiming to revive ties strained during the previous administration. "For Saudi Arabia and its neighbors, this visit is more than symbolic. It's a strategic reset," explains Hashmi (07:25). Meanwhile, for President Trump, the focus remains on securing substantial investment deals that could bolster the U.S. economy.

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Conclusion

The episode of the Marketplace Morning Report provides a comprehensive overview of the temporary U.S.-China tariffs deal, its immediate market implications, and the ongoing economic challenges faced by China. Additionally, it delves into President Trump's strategic Middle East tour, highlighting significant investment and defense negotiations aimed at strengthening U.S.-Gulf relations. These developments collectively shape the current landscape of global economic and political interactions.

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Notable Quotes:

• Mariko Oi: "Both sides have agreed to cut levies by 115% for the next 90 days" (01:42).
• Mariko Oi: "Prices in China are still falling, especially at factories, at quite a steep level" (03:17).
• Samir Hashmi: "Saudi Arabia has pledged to invest $600 billion over the next four years" (05:22).
• Samir Hashmi: "President Trump is expected to propose a new $100 billion deal" (05:53).
• Samir Hashmi: "For President Trump, it's about investment deals in Riyadh" (07:25).

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This summary provides an in-depth overview of the key discussions and insights from the Marketplace Morning Report episode released on May 12, 2025, ensuring that listeners are kept informed on critical economic and political developments.

Transcript

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[Liana Byrne]

Tariffs have fallen, but is the trade war over? Good morning, this is the Marketplace Morning Report and we're live from the BBC World Service. I'm Liana Byrne. So there's been a thaw. The US And China have struck a temporary deal to ease their escalating trade war. Both sides sell cut tariffs by 115%, a big step given the US was charging 145% on some Chinese goods. The agreement only lasts 90 days though, so it's more of a pause than a full resolution. The BBC's Mariko Oi is in Singapore and has been following this story. Hi Mariko.

[Mariko Oi]

Hello.

[Liana Byrne]

So what's been agreed?

[Mariko Oi]

It seems like quite a major de escalation. So basically the US has agreed to lower tariffs on all Chinese goods from the current 145% to 30%. And China will also cut its levies on US products to 10%. So basically they have both agreed to cut levies by 115% for the next 90 days. So basically their hope hoping to reach a trade deal within those three months so that they don't have to keep fighting this tit for tat trade war.

[Liana Byrne]

Now, if you're in the U.S. how quickly would you feel any relief from this 90 days pause?

[Mariko Oi]

I think it might. I mean, you know, we'll just have to see how quickly customs can, you know, get used to the new rules and so on. Because if you remember, when those tariffs were announced, there was a bit of a delay in customs figuring out how to, how to deal with all the shipping and so on. After all those, you know, roller coaster ride, extreme volatility that we saw in the stock market at least these agreements are definitely, you know, a sigh of relief.

[Liana Byrne]

How have markets reacted?

[Mariko Oi]

The Chinese market, the Hong Kongese market have reacted positively, not surprisingly, you know, they were somewhat muted earlier in a day even though we knew that some kind of an agreement was reached, but we didn't know any of the details. And I think it's fair to say that it is a lot bigger cut than what some experts were expecting, which is why we saw that jump in the stock market, especially in Hong Kong and mainland China.

[Liana Byrne]

At the same time, China's economy has been under pressure lately. And we also saw latest data out today showed some worrying signs, didn't it?

[Mariko Oi]

Yes, absolutely. You and I have been talking about all these challenges that China's economy faces. But one of the things that many economists are concerned about is what's known as deflation. So that's when prices fall. Now, many of our listeners might think that, oh, you know, that's great to have prices falling, but it really slows down the country's economic activity. So today's data show that prices in China are still falling, especially at factories, at quite a steep level. In fact, the steepest fall in six months in the month of April. And that is definitely a worrying sign because even though Beijing has been trying many, many different measures, trying to stimulate the economy, encourage consumers to spend, it just goes to show that the fundamentals of the Chinese economy remain quite weak. And even though things might be improving slightly, this trade war is not going to help.

[Liana Byrne]

Absolutely. We're going to be talking about it for a long time coming. The BBC's Mariko Oy. Thank you so much for joining us on Marketplace.

[Mariko Oi]

Thank you.

[Liana Byrne]

Now, let's talk about some more global numbers. Saudi Aramco, the world's biggest oil firm, says profits dropped nearly 5% last quarter as weaker demand and rising costs took a toll. And in India, pharmaceutical stocks slid after President Trump pledged to cut drug prices by 30 to 80% to match other wealthy nations. Now this week, President Trump makes his first foreign visit with a three day Middle east tour. He's actually following in his own footsteps because in his first term he also chose to kick off his overseas visits there. So what are both Trump and his hosts hoping for this week? Here's the BBC's Samir Hashmi.

[Samir Hashmi]

This was how President Donald Trump was welcomed to Riyadh back in 2017. Hundreds of Saudi men performed the ardha, the traditional sword dance, at the historic Murabbah Palace. And among them, swaying and smiling with a sword in his hand, was President Trump. Now, eight years later, I can also.

[Liana Byrne]

Confirm the dates of the president's trip to the Middle East. He will travel to Saudi Arabia, Qatar and the United Arab Emirates from May 13 until May 16.

[Samir Hashmi]

For Trump, the stakes are high. He is eyeing major Gulf investments, especially from sovereign wealth funds. Saudi Arabia has already pledged to invest $600 billion over the next four years. The United Arab Emirates has committed $1.4 trillion over the next decade. Karen Young is a leading Gulf expert at the Middle East Institute.

[Liana Byrne]

These are very big numbers. You know, they're not really realistic in terms of what would flow in direct investment. It's about sort of long term strategic investment in the United States.

[Samir Hashmi]

Defense will also be high on the agenda during President Trump's visit to Riyadh. The United States has long been a major arms supplier to Saudi Arabia, with President Trump offering a $110 billion weapons package during his first term. But those deals face scrutiny after the 2018 murder of Saudi journalist Jamal Khashoggi, leading to restrictions on arms sales. Now, with bans lifted, President Trump is expected to propose a new $100 billion deal. Saudi commentator and author Ali Shihabi says Riyadh will be looking for firm assurances from Mr. Trump that this time the deals will go through.

[Liana Byrne]

It's a question of also having in place a more efficient procurement system which allows the kingdom to get ammunition, for example. So it's important that President Trump highlights that.

[Samir Hashmi]

I'm standing outside the King Abdulaziz Convention center here in Riyadh. This is the venue where the Saudi government will be organizing a major investment summit on the day President Trump arrives. It will be attended by ministers and chief executives from both the countries. While much of the attention is on President Trump drawing Gulf capital into the US Economy, the Saudis will use this opportunity to attract American investments into the country. For Saudi Arabia and its neighbors, this visit is more than symbolic. It's a strategic reset, a chance to revive ties that frayed during the Biden years. But for President Trump, it's about investment deals in Riyadh. I'm the BBC Sameer Hashmi for Marketplace.

[Liana Byrne]

And that's it from the Marketplace Morning Report from the BBC World Service. I'm Lyanna Byrne. Have a great day. Thanks for listening. Can we invest our way out of the climate crisis? Five years ago, it seemed like Wall street was working on it until a backlash upended everything. So there's a lot of alignment between the dark money, right, and the oil industry. On. Hi, I'm Amy Scott, host of How We Survive, a podcast from Marketplace. In this season, we investigate the rise, fall and reincarnation of climate conscious investing. Listen to How We Survive. Wherever you get your podcasts.