06:33 AM EDT, 05/12/2025 (MT Newswires) -- The Chinese and United States governments released a joint statement following trade talks in Switzerland, announcing a 90-day ceasefire of sorts on the trade war, bringing U.S. tariffs on Chinese products back to 30%, and Chinese tariffs on U.S. goods to 10%, said ING.

It remains uncertain if the "de minimis" exemption for products shipped from China and Hong Kong will be restored, or if the minimum fees will remain, wrote the bank in a note to clients. These rates return tariffs to April 2 pre-Liberation Day levels and represent a better-than-expected de-escalation.

Many market participants expected a de-escalation to near the post-Liberation Day tariffs of around 50%-60%, which would have been a smaller boost to Chinese exports, stated ING.

Although the de-escalation of the trade war benefits both economies, the agreement, which significantly lowers tariffs without any concessions, is likely to be viewed as a particular victory for China, pointed out the bank. China had previously demanded a reduction in tariffs before negotiations, and this now seems to have been achieved.

China's response following the April escalations showed that it was prepared for an extended test of endurance if necessary.

China's April trade data may have strengthened its hand heading into the Switzerland negotiations. The data showed that despite the 145% tariff hike, and talks of a de facto embargo and hard decoupling, exports to the U.S. only fell to -21% year over year in April, implying that significant tariffs were being paid by U.S. importers. This is consistent with anecdotal evidence that many Chinese exports don't necessarily have an obvious or easy substitute product, added the bank.

Before President Donald Trump's Liberation Day surprise prompted a retaliation, ING noted that China's prior responses to U.S. tariff escalations had been quite measured to preserve the possibility for negotiations. Restoring tariff levels to this state has once again opened the door for those negotiations to continue.

The bank previously believed that the fentanyl issue is one where there could be an area of cooperation, and indeed this was an area highlighted by U.S. Treasury Secretary Scott Bessent after the Switzerland talks.

In ING's view, the reduction of tariffs on China back to 30% is a sufficient enough reduction to allow for a more or less return of normal trade -- at this level, the bank suspects exporters, importers and consumers will share in absorbing the impact of the tariffs, and overall business will likely resume.

Looking back, the 20%-30% tariff level through Q1 saw exports to the U.S. rise around 5.0% year over year, though this may be skewed to the upside due to trade frontloading.

In terms of impact on China's growth, the 90-day ceasefire will upgrade ING's Q2 and Q3 growth outlook. The bank suspects that China's May and June exports to the U.S. will bounce back sharply as importers with depleted inventories will take advantage of the ceasefire to resume imports.

Depending on how talks proceed, the bank sees a frontloading of exports again in July and August, especially if there isn't much clarity on a longer-lasting bargain being struck heading into the later stages of the 90-day period.

ING is reverting its forecast for the year back to 4.7%, with further upside possible if a bilateral agreement is reached within the 90-day period.

The market's immediate reaction to the yuan (CNY) has been a modest strengthening of the CNY against the US dollar (USD), with the USDCNY and USDCNH both at 7.21 at the time of writing ING's note on Monday.

The USDCNY is now trading at a lower level than pre-Liberation Day levels, despite the People's Bank of China easing and the back-and-forth tariff developments. Positive news flow could encourage capital inflows and support further strengthening of the CNY in the near term, though how this will balance out with what may also be conditions for a recovery of the USD remains difficult to gauge at this point.

ING's forecast band of 7.00-7.40 remains unchanged.