New Chinese Trade Deal: Liked by Voters and Markets

On Monday, President Trump and Treasury Secretary Scott Bessent announced that China and the United States had reached an agreement to reduce tariffs by 115% for 90 days. This brings the Chinese tariff on U.S. goods down to 10% from 125%, and the U.S. tariff on Chinese goods down to 30% from 145%. While broad tariffs have mixed popularity, tariffs on China are broadly popular, according to the latest polls.

A poll from Economist/YouGov asked 1,785 U.S. citizens about the Chinese-U.S. trade relationship and whether they thought China had an unfair trade policy with the United States. A plurality, 42%, said it did, while only 20% said China had a fair policy with the United States.

This perception of unfair trade policy led most respondents to favor tariffs on China. The last Economist poll to ask about a specific tariff rate for China was conducted March 1–4, in which 48% said they supported a 10% tariff on Chinese goods, while only 35% opposed it. However, voters did not support the extent to which the latest tariff battle escalated, with 50% saying it went too far, while only 32% said it had been about right or had not gone far enough. With the return to lower tariffs for both countries, voter approval of tariffs on China may rise.

Part of the support for tariffs in the 10%-30% range stems from an increasing belief in Trump’s arguments around tariffs. In a TIPP Insights poll conducted from April 30 to May 2, 49% agreed with the view that Trump’s proposed global tariffs on countries with large trade surpluses with the United States would help revive American manufacturing, while 36% disagreed.

The prospect of using tariff revenue to eliminate the income tax for people earning under $200,000 was also appealing. When asked whether this possibility made them more or less likely to support tariffs, 32% said it made them more likely, while 25% said it made them less likely. 

To completely eliminate the income tax for people making less than $200,000 would require a high tariff rate, as income taxes on earners making less than $200,000 generate approximately $700 billion per year. If imports remained at 2024 levels of $3.36 trillion, this would equate to an average tariff rate of 21%. However, the actual rate would need to be significantly higher, as imports would likely decline precipitously under such a high across-the-board tariff, requiring an even higher rate to offset the loss.

Markets also reacted positively to the announcement. At the open on Monday, following the morning announcement, the S&P 500 rose 2.5% and closed the day up 3.2% from its previous close on Friday.