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The US-China trade deal seems to be a bigger win for China than the United States. While the de-escalation offers relief to both economies, economists expect a more pronounced short-term boost for China.
“Either Trump has completely changed the narrative on China, or this is simply proof of the panic that gripped Washington the past few weeks when team Trump found out the hard way that it was China which was holding the better cards in this game of poker,” comments Vincenzo Vedda, Chief Investment Officer of DWS.
On May 12, 2025, the two nations agreed to a 90-day truce of sorts, reducing US tariffs on Chinese goods from 145% to 30% and Chinese tariffs on US products from 125% to 10%.
“It is probably too soon to say whether the pause is a permanent reduction,” says Elizabeth Kwik, investment director of Asian equities at Aberdeen Investments. “We expect that negotiations will be a protracted process, and our Global Macro Research team expect that US-China tariffs will settle at around 60%, as Trump promised on the campaign trail. That said, the sudden pause – and the potential for deal-making – suggest risks could be skewed to a lower end-point,” she adds.
ING has upgraded its Q2 and Q3 growth forecasts for China in response to the US-China trade deal. “We suspect that China’s May and June exports to the US will bounce back sharply as importers with depleted inventories will take advantage of the ceasefire to resume imports. Depending on how talks proceed, we could see a frontloading of exports again in July and August,” ING notes.
Wells Fargo believes China could now meet its 5% growth target this year—assuming negotiations stay on course.
Others are more cautious. “There are a few reasons why the China agreement is probably not a game-changer for the outlook,” says Ben May, Director of Global Macro Research at Oxford Economics. While the reduction in tariffs lowers the risk of a prolonged trade war, May stresses that this mainly reduces tail risks rather than overall uncertainty. The deal marks only the beginning of broader negotiations, and the lack of legal commitments raises doubts about durability.
“There’s a high risk that negotiations could break down once both sides demand greater clarity on some of the more contentious parts of any agreement. Even if longer-term deals are reached, businesses may be reluctant to assume that the terms won’t be changed in the future,” May warnes. And although the truce may lower the odds of a US or global recession, he argues it’s too early to justify any meaningful upgrades to growth projections.
