Treasury Secretary Scott Bessent prepares to testify before the Senate Finance Committee during his confirmation hearing in the Dirksen Senate Office Building on Capitol Hill on Jan. 16, 2025 in Washington, D.C.  (Photo by Chip Somodevilla/Getty Images)

The United States and China agreed Monday to lower steep tit-for-tat tariffs for 90 days, temporarily cooling a trade war but still leaving a cloud of uncertainty over businesses in the world’s two largest economies.

American and Chinese officials announced the pause will go into effect Wednesday, following talks in Geneva, Switzerland, as negotiations on a final deal continue. U.S. markets rallied following the announcement.

U.S. tariffs on Chinese goods will drop to a universal 10% baseline, down from the 145% President Donald Trump imposed last month. Trump’s previous 20% emergency tariffs announced in February on all products because of illicit fentanyl chemicals from China will remain in place, as will protective tariffs on goods still in place from the president’s first term. New duties on small packages sent to the U.S. from China, valued at less than $800, will also remain.

Fentanyl discussion

Treasury Secretary Scott Bessent said Monday that he and Chinese counterparts “had a very robust and highly detailed discussion” on preventing fentanyl and the chemicals to make the synthetic opioid from entering the U.S.

“The upside surprise for me from this weekend was the level of Chinese engagement on the fentanyl crisis in the United States. They brought the deputy minister for public safety,” Bessent said.

Bessent told reporters that overall negotiations were “always respectful.”

“We had the two largest economies in the world. We were firm — and we moved forward … We came with a list of problems that we were trying to solve and I think we did a good job on that,” Bessent said.

The White House touted the 90-day pause as a “landmark deal” in a Monday press release.

China has agreed to lower its tariffs on U.S. goods to 10%, down from 125%, according to a joint statement.

Tariffs are taxes on goods coming across the border. Companies and small businesses that import items from China must pay them to the U.S. government to receive their purchases.

Business reaction unclear

“I see the president’s approach to this as him putting a knife in your back and then pulling it out an inch and calling it a win,” said Alex Duarte, senior economist at the Tax Foundation, a think tank that advocates for lower taxation.

“Depending on the good, the rate could be close to 55%, so the tariffs on China are still pretty high. It’s hard to say how businesses are supposed to react to this because there’s so much uncertainty and the president behaves very erratically,” Duarte told States Newsroom Monday.

States Newsroom spoke to several business owners who were extremely nervous ahead of Trump’s April 2 “liberation day” tariffs. That announcement sent markets plummeting.

Marcus Noland, executive vice president and director of studies at the Peterson Institute for International Economics, said in an interview Monday the situation has “gone from OK to apocalyptic to bad.”

“It’s clearly preferable to a tariff that would have essentially ended trade between the two countries, but it’s still significantly more restrictive than where we started the year,” Noland said.

The White House released a statement Monday saying the administration will continue “working toward a rebalancing” of a trade deficit with China. In 2024, the U.S. purchased $295.4 billion more in goods from China than China purchased from the U.S.

“Today’s agreement works toward addressing these imbalances to deliver real, lasting benefits to American workers, farmers, and businesses,” according to the White House press release.

Treasury Secretary Scott Bessent prepares to testify before the Senate Finance Committee during his confirmation hearing  in the Dirksen Senate Office Building on Capitol Hill on Jan. 16, 2025, in Washington, D.C.  (Photo by Chip Somodevilla/Getty Images)

WASHINGTON — The Treasury Department announced Friday that Congress must address the debt limit before August, setting a firm deadline for Republicans to wrap up work on the “big, beautiful bill” that will raise the nation’s borrowing limit by up to $5 trillion.

Treasury Secretary Scott Bessent wrote in a letter to congressional leaders that “there is a reasonable probability that the federal government’s cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess.

“Therefore, I respectfully urge Congress to increase or suspend the debt limit by mid-July, before its scheduled break, to protect the full faith and credit of the United States.”

The projection marks the first time the Trump administration has weighed in publicly on when the government will likely reach default since the last suspension expired in January. 

In the months since then, the Treasury Department has used accounting maneuvers known as extraordinary measures to pay all of the country’s bills in full and on time.

Treasury’s projection is similar to a report the nonpartisan Congressional Budget Office released in March predicting the country would reach default in August or September unless Congress acted before then.

Reconciliation package

Republicans are hoping to lift the debt limit without having to negotiate a bipartisan agreement with Democrats, which is typically how lawmakers have addressed the debt limit during the past couple decades.

GOP leaders plan to raise the debt limit by between $4 trillion and $5 trillion in the 11-bill reconciliation package they’re using to address tax law, overhaul higher education aid and cut federal spending.

Speaker Mike Johnson, R-La., expects his chamber will vote on that legislation before the end of May, though Senate leaders haven’t put a timeline on when they’d bring the bill to the floor in that chamber.

GOP senators are likely to propose several amendments to the package, and any changes by the Senate would require the bill to get a final sign-off in the House before it could head to President Donald Trump’s desk.

The Treasury Department’s projection that a debt limit default will likely take place if no action is taken before August puts a firm deadline on when Republicans will need to reach final agreement.

Caution against waiting

Bessent also cautioned lawmakers against waiting until the last minute to get their work done.

“Prior episodes have shown that waiting until the last minute to suspend or increase the debt limit can have serious adverse consequences for financial markets, businesses, and the federal government, harm businesses and consumer confidence, and raise short-term borrowing costs for taxpayers,” he wrote. “A failure to suspend or increase the debt limit would wreak havoc on our financial system and diminish America’s security and global leadership position.”

A default on the country’s debt would limit the federal government to spending only the money it has on hand, likely leading to delayed, incomplete, or nonexistent payments on thousands of programs, including Social Security, Medicare, Medicaid, troop pay, veterans benefits and nutrition programs, among many others.

It would also lead to a downturn in the global economy with a recession being among the better scenarios.

A default is vastly different from a partial government shutdown and would lead to more significant consequences for federal spending and the economy.