Tariff tracker, May 12: A welcome US-China reprieve and the promise of pharma price cuts

In a press conference, Bessent characterised the talks as “very productive” and expressed that both the US and China have a “shared interest… in balanced trade.”

Markets breathe easier following the US-China announcement…

Stock futures rose on Sunday evening at the conclusion of the weekend’s trade talks, with contracts tied to the S&P 500 and Dow trading 1% higher, and Nasdaq-100 futures at 1.4% higher, according to The Wall Street Journal reporting.

US President Donald Trump had begun his second term in January 2025 aiming to revisit the 2020 trade agreement, called the ‘Phase One’ trade deal with China, which had then pledged to purchase a minimum of $200 billion in additional US goods and services over the following two years. The onset of the Covid pandemic had derailed this deal, and the subsequent Biden administration had not pursued the same.

However, this scenario rapidly devolved within days. On February 1, the US slapped a 10% tariff on fentanyl on China (along with Mexico and Canada). A series of retaliatory and counter-retaliatory measures were unleashed by both countries, raising US tariffs on China to a whopping 145% and Chinese counter-tariffs to 125% by early April. In the process, China taxed US exports of coal and Liquefied Natural Gas (LNG) and restricted rare earths exports citing a national security risk. The US raised the de minimis duty (which had allowed Chinese imports valued at below $800) to 90%, and taxed Chinese ships and its maritime industry.

Does this mean all tariffs have ended? Not quite. The 20% fentanyl duties are set to remain in place, with talks on the same expected to continue over the coming week. Other tariffs on China dating back to Trump’s first term, as well as Chinese tariffs on US agricultural goods, retaliation for the 20% fentanyl tax, will remain in place.

In a joint statement, both countries announced they would establish a ‘mechanism’ to continue discussions about economic and trade relations, led by Chinese Vice Premier He Lifeng, and US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer. This presents a welcome step forward away from the fears of decoupling between the world’s two largest economies, a sentiment Bessent echoed on Monday.

“The consensus from both delegations is neither side wants to be decoupled, and what have occurred with these very high tariffs … was an equivalent of an embargo, and neither side wants that. We do want trade. We want more balance in trade. And I think both sides are committed to achieving that,” he said.

…But pharma stocks dip amid promised drug price cuts

The US president announced through a social media post that he would sign an executive order on Monday morning, slashing prescription drug and pharmaceutical prices by 30% to 80%. Trump described this as a “most favored nation’s policy” wherein the US would pay “the same price as the Nation that pays the lowest price anywhere in the World.” In a subsequent post, he promised a 59% cut in prescription drug pricing.

The US currently pays two to three times more for the same drugs compared to other wealthy nations, and Trump has long expressed an interest in reducing this gap. A preliminary step in this direction was taken by former President Joe Biden’s Inflation Reduction Act, which allowed the government to negotiate the price of its most expensive drugs. Even then, the prices of the first 10 drugs thus negotiated ranged from double to five times what these companies charged in other high-income nations, according to Reuters reporting.

The order will likely impact pharma markets worldwide, especially India, home to the largest number of generic medicine providers. A Reuters report noted that the U.S. accounts for nearly a third of India’s pharma exports, which rose 16% to about $9 billion last fiscal year, according to government-backed trade body Pharmexcil. The Indian Brand Equity Foundation, in its February 2025 pharma report, noted that the Indian pharmaceutical sector serves 40% of the generic drug demand in the US and 25% of all medicines in the UK.

Pharmaceutical companies are vehemently opposed to this measure, citing fears that this would cut into their profits and reduce funds they could spend on research for new medicines.