US President Donald Trump proposed reducing tariffs on China to 80% in a post on Truth Social. This would be a cut from the current 145% rate, but Trump said it would still be historically high.

He mentioned Treasury Secretary Scott Bessent is leading the negotiations ahead of trade talks scheduled for Saturday in Switzerland.

The US-China trade war has caused economic uncertainty, hurting business confidence and raising fears of a downturn.

After his comments, US stock futures fell, erasing most of May 9, earlier gains. The S&P 500 continues to lag behind international indices despite recovering from the April 2025 drop.

🔗 Source: Axios

🧠 Food for thought

1️⃣ Historical scale of US-China tariff escalation represents unprecedented economic pressure

Trump’s proposed 80% tariff would mark a milestone in what has already been the most significant trade conflict since World War II.

The current effective US tariff rate on Chinese imports stands at 107%, while China has retaliated with a 144% effective rate on US imports, levels not seen in modern trade relations 1.

This escalation has already reduced bilateral trade from $661.5 billion in 2018 to $582.4 billion in 2024, representing a significant contraction in what was once the world’s most important trading relationship 2.

Economic historians draw parallels between the current situation and the Smoot-Hawley Tariff Act of 1930, which is widely recognized for deepening the Great Depression by triggering retaliatory measures and collapsing global trade 3.

Even at the proposed “reduced” 80% level, the tariffs would push the average effective US tariff rate to 11.1%, the highest since 1943, fundamentally altering the economic relationship between the world’s two largest economies 3.

2️⃣ Economic costs of the trade war extend well beyond headline GDP figures

Markets have already provided a preview of potential economic damage, with the announcement of the 10% universal tariff triggering significant stock market losses, erasing $6.6 trillion in value 4.

Goldman Sachs has already revised China’s GDP growth forecasts downward by 0.5 percentage points for both 2025 and 2026, while US GDP is projected to decline by 0.8% to 1.0% in the long run due to the tariffs and retaliatory measures 13.

The average American household faces an estimated $1,200 increase in annual costs due to higher consumer prices, with this burden falling disproportionately on lower-income households 3.