The global economy remains fraught with uncertainty following the dramatic trade policy moves made by the US in early April. However, there has since been a palpable easing of tensions.
A particularly reassuring move back in the direction of the status quo ante was made on 12 May, when the US and China announced they had reached an agreement to reduce tariffs from previously eye-watering levels by 115 percentage points, for at least 90 days. Under the deal, a tariff of 30% will now apply on Chinese exports to the US, with a 10% tariff on goods going in the other direction.
The US-China agreement followed an earlier pausing of many of the tariffs that the US had announced for other countries. Markets breathed a sigh of relief in response to each hiatus, indicating a growing confidence that the rupture with the previous trading order might not be as extensive as had been feared.
Nevertheless, much remains unclear – at least until pauses elapse, and decisions are needed about whether to extend them.
In response to a typical refrain about the economy’s contraction in the first quarter, The Economist challenges a common misconception about GDP: that rising imports are a drag on growth.
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