Global markets surged this week following the announcement of a temporary trade agreement between the United States and China that significantly reduces tariffs between the world's two largest economies. The deal, which took effect on Wednesday, May 14, cuts US tariffs on Chinese imports from 145% to 30% and Chinese duties on American goods from 125% to 10% for an initial 90-day period.
The agreement represents a critical development for the artificial intelligence sector, which has been caught in the crossfire of escalating trade tensions. Semiconductor supply chains—the backbone of AI development—have been particularly vulnerable to disruption, with both countries previously implementing various restrictions on chip exports and imports.
Prior to the truce, China had already made strategic moves to protect its tech industry by exempting certain US-made semiconductors from tariffs. According to reports from April, China quietly removed tariffs on eight classifications of American microchips to shield its leading technology companies from trade fallout. This selective approach highlighted the interdependence of global AI supply chains despite geopolitical tensions.
The temporary pause in the trade war also includes China's agreement to lift export countermeasures issued after April 2, including restrictions on rare earth minerals and magnets widely used in high-tech manufacturing. These materials are essential components for advanced computing systems that power AI applications.
While the truce offers immediate relief, industry analysts remain cautious about long-term prospects. "This reflects both sides recognizing the economic reality that tariffs will hit global growth and negotiation is a better option going forward," noted Tai Hui, APAC chief market strategist at J.P. Morgan Asset Management. The 90-day timeframe may prove insufficient to resolve deeper structural issues in the US-China trade relationship.
For AI development specifically, the agreement provides breathing room for companies to recalibrate supply chains and procurement strategies. The semiconductor industry, which has already lost billions in revenue from previous export controls, stands to benefit significantly from the reduced trade barriers, potentially accelerating innovation in AI technologies that depend on advanced chips.