The U.S. and China have agreed to cut tariffs on $60 billion worth of goods traded between the world’s two largest economies, marking another step toward easing trade tensions following last week’s meeting between President Donald Trump and Chinese President Xi Jinping.
Why it matters: Under the new U.S.-China Board of Trade framework, each country selected roughly $30 billion of non-sensitive goods to receive more favorable tariff treatment. The tariff reductions were accompanied by an extension of the broader trade truce between Washington and Beijing.
- American exporters stand to benefit. U.S. agricultural products, fish and seafood, logs and wood products, cosmetics and medical devices are among the products receiving favorable treatment when entering China.
- American consumers could also see some relief. Chinese-made small appliances, toys, holiday decorations and children’s car seats are among the imports receiving preferential treatment in the U.S.
The economic impact: The agreement covers only a fraction of total U.S.-China trade, so it isn’t likely to dramatically change the inflation picture by itself. But tariffs are effectively taxes on imports, and reducing them can lower costs for importers and potentially reduce the prices ultimately paid by consumers.
The bottom line: The agreement is relatively small, but the direction matters. Lower tariffs and an extended trade truce reduce some of the upward pressure on prices while lowering the risk of another escalation between the world’s two largest economies. If broader tariff reductions follow, that could be good news for inflation—and, by extension, Treasury yields and mortgage rates.