At some point last weekend in Geneva, US and Chinese trade negotiators agreed to something that markets had stopped expecting before summer: a substantial, immediate tariff reduction on both sides.
US tariffs on Chinese goods dropped from 145% to 30%. China's tariffs on US goods dropped from 125% to 10%. Those are 115-percentage-point cuts on each side — executed overnight, announced Monday morning, and described by everyone who had been tracking the negotiation as "earlier and larger than anyone expected."
The market reaction was immediate and large. But the deal itself requires more reading than Monday's price action suggests.
What Actually Happened in Geneva
The Geneva talks were described publicly as a 48-hour session between US Treasury Secretary Scott Bessent, Trade Representative Jamieson Greer, and Chinese Vice Premier He Lifeng. The US side framed it as a mutual recognition that the current tariff levels were economically destructive for both countries — not a concession, but a practical reset.
The 90-day clock starts from the announcement date, meaning the current rates (30% US, 10% China) are in effect until mid-August. Within that window, both sides are expected to continue negotiations toward a more permanent arrangement.
What was explicitly carved out: the 20% fentanyl-related tariffs that the US imposed on China remain in place regardless of the broader trade truce. Those tariffs were framed as a separate policy instrument tied to a specific enforcement objective — not a trade negotiation variable. They will not come down as part of a trade deal.
What Was Not Resolved
The list of unresolved items is long and technically complex.
Technology transfer restrictions — the rules governing how Chinese companies can access US semiconductor equipment, AI models, and dual-use technologies — were not addressed in Geneva. The export control framework that the Biden administration built and the Trump administration tightened is a separate set of regulations from tariff policy, and it operates on a different legal basis.
Market access for US companies in China's domestic market — financial services, cloud computing, data-driven services — was not part of the Geneva agenda. This has been a US structural complaint for decades and remains fundamentally unresolved.
The ownership structure of TikTok, which has been a live political issue in Washington throughout the trade war, was not settled by the tariff truce.
The Geneva deal is a de-escalation on one instrument — tariffs — while leaving the broader architecture of US-China economic competition intact.
The Trump-Xi AI Summit: The Next Catalyst
On May 14–15, Trump and Xi are scheduled to meet with AI guardrails as a specific agenda item. This is the next event risk for technology and semiconductor markets.
The core question for that meeting: can the US and China agree on any framework for AI safety cooperation, AI export controls, or AI deployment standards that both sides can describe as a win? The incentive structure is difficult. The US wants to maintain its AI capability advantage through export controls. China wants relief from those controls to access chips and tools that accelerate its own AI development. Those objectives don't obviously overlap.
If the AI summit produces a joint statement — even a vague one — it provides additional momentum for the broader détente and reduces the probability of tariff re-escalation within the 90-day window. Technology stocks and semiconductor names would likely react positively.
If the summit produces friction or no meaningful joint statement, market participants will begin pricing in the risk that the 90-day truce is the ceiling rather than the floor of the current détente. In that scenario, the supply-chain-sensitive sectors that rallied Monday would give back gains.
The 90-Day Arithmetic
Mid-August is the deadline for the current truce. The US summer political calendar between now and then includes: the AI summit (May 14–15), a Federal Reserve meeting in June, and the Congressional recess in August that makes major legislative or regulatory action unlikely.
For the truce to convert into something more durable before August, the negotiating teams need to define what the permanent tariff structure looks like — almost certainly something between the current 30% and the pre-tariff-war baseline of the low single digits. That's a wide range, and the politics on both sides constrain how far each government can move without losing face domestically.
My base case: the 90-day truce holds because both sides benefited from the market rally and neither wants to be responsible for reversing it. The probability of a comprehensive structural trade deal before August is low. What's more likely is a second extension — "90 more days" — announced sometime in late July or early August.
That would keep markets in the current range, keep tariff-sensitive sectors performing, and delay the harder negotiations until a later political window. It's the path of least resistance, which is usually the path taken.
— Ruslan Averin, averin.com