The US and China made a deal on Monday, May 12, to lower taxes on their products for 90 days, ending part of their harsh trading dispute that has hurt worldwide markets and companies. In this short peace agreement, the US will lower its extra charges on Chinese goods from 145% to 30% for three months, while China will drop its fees on US goods from 125% to 10%.
China also promised to remove the trading blocks it had put in place after April 2, including limits on special minerals and magnets that are important for making advanced technology.
Trump’s Tariff Chaos Disrupts Global Businesses
Trump shocked world leaders and businesses when he introduced “matching” taxes on goods from almost all countries worldwide, with some taxes reaching 50%. However, just seven days later, he announced a 90-day hold on these higher taxes to allow for trade talks, temporarily lowering most countries’ rates to 10% for most products.
This did not apply to China, as the two nations instead began a growing tax battle that quickly saw US taxes on Chinese products climb to 145% while Chinese taxes on American products rose to 125%.
Since then, there has been a temporary truce between the two economic giants, and financial markets have responded positively. Online trading platforms saw immediate activity increases as Wall Street stocks surged upward. The S&P 500 reached its highest closing level since March 3, while the tech-heavy Nasdaq Composite recorded its strongest finish since February 28.
The trade problems, which had stopped almost $700 billion in trade between the two countries, caused many shipping containers from China to the US to stop moving, and ports became empty. The Port of Los Angeles, America’s busiest container center, saw shipments fall by up to 30% in early May as President Trump’s taxes hurt trade. Companies and stores that bring in goods, especially those connected to China, felt the most significant impact.
Big companies like Ford have increased prices on some imported products by $600 to $2,000. Shein has raised prices by as much as 377%. Temu has increased prices on many items by more than 10% and stopped selling others completely. Even Walmart’s leader, Doug McMillon, said, “Higher taxes will lead to higher prices,” starting in May. “We will try our best to keep our prices as low as possible. But given how large these taxes are, even at the lower levels announced this week, we cannot absorb all the costs because retail profit margins are small,” Walmart CEO Douglas McMillon said during a call about earnings.
Trump later replied on Truth Social, saying, “Between Walmart and China, they should ‘PAY THE TAXES THEMSELVES,’ and not charge valued customers ANYTHING. I’ll be watching, and so will your customers!”
Businesses Rush to Import During 90-Day Tax Break
The reality is that larger companies can handle these kinds of tax changes better simply because of their size and ability to absorb higher import taxes more easily than smaller businesses. For many American companies, not knowing what will happen after three months has left businesses trying to adjust to changing policies without clear information about what they should plan for.
Some companies have hurried to use the lower tax period by ordering many products quickly and building up supplies. Orders for shipping containers from China to America jumped nearly 300% in the days following the announcement of the temporary peace, especially as businesses prepare for holiday shopping at the end of the year.
Many stores had stopped or canceled orders before the temporary tax break. They are now working with their suppliers to quickly increase orders so products arrive before the 90-day period ends.
Uncertainty Around the Truce With China and the Global Market
The trading peace between the US and China may not be solid. Both countries seem to be on edge, and neither side fully trusts that the other will follow through on its promises.
This has become very clear with the Trump government’s newest plans to push friends into reducing connections with China. Reports say America is threatening its trading partners with taxes unless they stop Chinese companies from using their countries as places to make or send goods into the American market. These warnings come as the Trump government has recently increased its strong talk. Treasury Secretary Scott Bessent recently said that tax rates will return to “matching” levels if countries do not make trading deals with the US during the 90-day break.
President Trump has clearly shown he wants to rebuild American factories. He wants many American-owned factories in China and other countries to return to American soil.
About 32 percent of all world manufacturing happens in China, worth $4.97 trillion yearly, making it the biggest manufacturing center globally. The US handles nearly 16 percent of world manufacturing, worth $2.5 trillion yearly.
The Effect of Uncertainty on Businesses
The path forward remains unclear as businesses worldwide adjust to the current trade situation. The temporary 90-day truce between the US and China offers only short-term relief while the underlying tensions continue to shape global commerce. Although Trump’s pause in the trade fight gives some quick relief, it also proved what companies were worried about: these choices were short-term, not lasting, and simply random decisions that could easily be changed.
The outcome might actually encourage more companies to remain in China, where production quality is good and expenses, aside from import taxes, are low, while they wait for more explicit long-term rules.
Companies that had begun to spread their manufacturing away from China now find themselves caught in the middle of change, unsure if they should put more effort into moving or stop their plans.