In a significant move to ease escalating trade tensions, the United States and China have agreed to a 90-day reduction in tariffs, marking a temporary truce in their ongoing trade war. Concurrently, President Donald Trump has signed an executive order aiming to slash U.S. prescription drug prices by aligning them with the lowest prices paid globally.
U.S.-China Trade Truce: A 90-Day Tariff Reduction
On May 12, 2025, following intensive negotiations in Geneva, the U.S. and China announced a mutual agreement to reduce tariffs for 90 days. The U.S. will lower tariffs on Chinese goods from 145% to 30%, while China will reduce tariffs on U.S. imports from 125% to 10% .
This agreement comes after months of escalating duties that had significantly impacted global markets and supply chains.The temporary reduction aims to provide relief to businesses and consumers affected by the high tariffs and to create a conducive environment for further negotiations.
The announcement had an immediate positive impact on global financial markets. The Dow Jones Industrial Average surged by 1,160 points (2.8%), while the S&P 500 and Nasdaq gained 3.3% and 4.4%, respectively, marking their largest single-day gains since April 9 .
Trump’s Executive Order: Aligning U.S. Drug Prices with Global Lows
In a parallel development, President Trump signed an executive order introducing a “Most Favored Nation” (MFN) pricing policy for prescription drugs. This policy mandates that U.S. drug prices match the lowest prices paid by other developed countries, potentially reducing costs by 30% to 80%.
The MFN policy, initially proposed during Trump’s first term but blocked by a federal judge, aims to address the long-standing issue of Americans paying significantly more for medications compared to other nations. The executive order directs the Department of Health and Human Services to implement the policy across Medicare and Medicaid, and potentially extend it to the commercial market.
Pharmaceutical companies have expressed concerns over the policy, warning of reduced access to medications and potential harm to U.S. medical innovation. Analysts predict legal challenges ahead, but health policy experts acknowledge the potential for substantial savings for American patients.
Implications for India and Global Markets
The U.S.-China tariff reduction presents an opportunity for India to strengthen its position in global supply chains. With the temporary easing of trade tensions, Indian exporters may find increased demand for their products as companies seek to diversify their sourcing strategies.
Additionally, the MFN policy on drug pricing could impact Indian pharmaceutical companies that export to the U.S.While lower drug prices in the U.S. may increase competition, Indian manufacturers known for cost-effective production could potentially benefit from the policy shift.
Overall, these developments signal a significant shift in U.S. economic policy with potential ripple effects across global markets. Stakeholders worldwide will be closely monitoring the outcomes of these initiatives in the coming months.
