US-China 90-Day Tariff Truce: A Technical Overview
Overview of the Recent Tariff Agreement
On May 12, 2025, Washington and Beijing announced a 90-day suspension of additional tariffs, reducing US duties on Chinese goods from 145% to 30% and China’s retaliatory levies on US imports from 125% to 10%. The accord, negotiated in Geneva, also calls for China to “suspend or cancel” a broad range of non-tariff barriers—quotas, export restrictions and foreign investment reviews—targeted at American firms. In return, the US retains a baseline 25% tariff on standard Chinese imports, while exempting critical technology items subject to national-security assessments.
Immediate Market Reactions
- Equity indices: The S&P 500 climbed ~2.6% and the NASDAQ Composite jumped ~3.5%, driven by relief in semiconductor and cloud-computing stocks.
- Currency moves: The yuan strengthened 0.8% versus the dollar on expectations of higher exports from China.
- Bond yields: US 10-year Treasury yields dipped to 3.85% as risk-free rates fell on lowered global trade anxiety.
Impact on Semiconductor and AI Hardware Supply Chains
Semiconductors have been at the heart of the US-China trade standoff. Under the new 30% rate, items like NVIDIA A100 and H100 GPUs, Advanced RISC Machine (ARM) cores, field-programmable gate arrays (FPGAs) and high-end application-specific integrated circuits (ASICs) will see tariff relief. That translates to:
- 15–20% cost savings on data-center GPU rack deployments, according to Craig Benedict, Director of HPC Research at IDC.
- Reduced lead times: OEMs such as Dell, HPE and Lenovo report a 10% drop in component backorders for 5 nm and 3 nm node chips manufactured by TSMC and Samsung.
- On-shoring momentum: Combined with the US $52 billion CHIPS Act subsidies, foundries in Arizona and Texas can now lock in new contracts with major cloud-service providers.
Implications for Cloud and Telecom Sectors
Major cloud operators—AWS, Microsoft Azure and Google Cloud—rely heavily on high-performance accelerators for AI training. By lowering import costs, the deal could translate to a 5–8% reduction in GPU instance pricing by Q4 2025. Telecom equipment makers (Huawei, ZTE, Ericsson) also stand to benefit as 5G baseband units and optical transport gear see duty cuts, potentially accelerating BEAD-funded rural broadband projects in the US.
Economic Analysis and Expert Commentary
“This temporary detente avoids a worst-case decoupling scenario,” says Scott Bessent, US Treasury Secretary. “We’re strategically aligning tariffs to protect national-security interests—semiconductors, biotech, critical minerals—while keeping supply chains intact for the broader economy.” Meanwhile, Zhiwei Zhang, chief economist at Pinpoint Asset Management in Hong Kong, noted that “30% is far more attractive than the 50% we expected. It buys time for both sides to negotiate sector-specific carveouts.”
Outlook: Next Steps and Potential Risks
Over the next 90 days, negotiators will iron out:
- De minimis thresholds: Determining tariff treatment for low-value ecommerce parcels, currently at 120%.
- Intellectual property safeguards: Strengthening enforcement on counterfeiting and forced technology transfers.
- Sectoral roadmaps: Crafting agreements on green energy tech, 6G research collaboration and semiconductor export licensing.
Analysts warn that failure to agree on these points could trigger a swift reinstatement of higher tariffs. However, a successful resolution may pave the way for more open data flows, joint R&D in AI/ML, and stabilized global supply chains.