Updated May 13, 2025 at 1:11 PM EDT
News that the U.S. and China have paused massive tariffs on each other has U.S. businesses rushing to import goods that have been sitting at ports or factories in China for the past 40 days.
The deal, announced after negotiators from both countries met in Switzerland over the weekend, brings U.S. taxes on Chinese goods down to 30% from the 145% imposed by President Trump in early April. China agreed to lower its taxes to 10% down from the 125% it imposed in response to the U.S.
Stocks surged after news of the deal. But uncertainty is a major factor that will continue to weigh on the U.S. economy, Diane Swonk, chief economist at accounting firm KPMG US, told Morning Edition.
Swonk likened it to a broken stoplight at a busy intersection.
"Everyone all of a sudden slows down to a crawl to try to creep across the stoplight, not knowing which person's supposed to go next," Swonk said. "And some opt out entirely and do a U-turn, wait for traffic to clear or the stop light to be fixed."
Speaking to NPR's Leila Fadel, Swonk shared her thoughts on why the United States' deal with China might be a mixed news for consumers.
The good and bad news.
Swonk said the good news about the deal is that trade will flow again.
She added that it will take time for goods released in response to the lower tariffs to reach the U.S. market, so shoppers could still see some empty store shelves.
But "these sort of stop-go programs are the things that can make for very big policy mistakes," Swonk said, adding that when considering inflation and how it impacts the U.S. economy, "we remember the pandemic and it's much easier to shut factories down than ramp them back up again."
"This is the same thing where all of a sudden a lot of freight shipment fees went way up in the wake of the pandemic, which was an additional cost in addition to the tariffs," she added.
Stagflation is possible.
Swonk said the past 40 days has resulted in a paralysis on importing goods and now panic to bring them in. Those two factors, she added, can make for stagflation, a period during which the economy experiences higher costs for goods, higher unemployment and slower economic growth.
This combination is what the Federal Reserve worries about most, Swonk said. The Federal Reserve voted earlier this month to keep interest rates steady, citing concerns about economic uncertainty and the risks of higher unemployment and higher inflation.
"And it's not just a one-time event because of the layered nature and the unevenness [with] which tariffs have been applied," Swonk said. "It is a multiple time event that's causing these additional disruptions into the supply chain like what we are seeing right now."
The last time the U.S. experienced stagflation, Swonk said, was in the 1970s. During that time, oil prices spiked, as did the cost of goods and Americans accepted high inflation as a part of life.
Until the Fed knows inflation is under control, Swonk said it will have to hold off on additional rate cuts.
Agreements with other countries are going to take time.
The Trump administration has touted this latest deal with China as a success. Last week, the White House struck a deal with the United Kingdom that lifted tariffs on British steel and aluminum, but left a 10% tariff in place on most other U.K. goods. The U.K. trade deal was the first since Trump levied steep taxes across the globe.
Swonk said it's going to be very hard for the Trump administration to hammer out 90 negotiations in 90 days with other countries, adding that even those deals that have been announced have very tentative rules around how they're implemented.
"These things usually take years. The rule of law and the ability to enforce it is much harder when you're not dealing in a multilateral framework," Swonk said. "It's harder. It's just one-on-one transactional."
President Trump paused tariff hikes on other countries in early April for 90 days, saying more than 75 countries had reached out about seeking deals with the U.S. Some of those tariffs could resume in early July.
The radio version of this story was edited by HJ Mai. The digital was edited by Treye Green.
Copyright 2025 NPR
