Global stock markets experienced a notable surge following an agreement between U.S. and Chinese officials to temporarily suspend most tariffs imposed on each other. This development signals a significant shift in trade policy, contributing to heightened market reactions since President Trump resumed office. Futures for the S&P 500 indicated a potential opening uptick of 3% in New York on Monday—marking the strongest gain for the index since early April, driven by a previous rally related to Trump’s decision to pause tariffs on all countries, excluding China. Meanwhile, futures for the tech-focused Nasdaq suggested an impressive 4% rise.
This apparent thaw in U.S.-China relations comes as a relief after last month’s unexpected announcements of steep tariffs that led to considerable market declines. The S&P 500 had plummeted nearly 20% from its February peak but has since recovered about two-thirds of those losses, thanks to various exemptions and pauses in U.S. tariffs. The joint statement released on Monday after weekend discussions in Geneva revealed that both nations agreed to reduce their tariffs for 90 days while ongoing trade negotiations take place. Specifically, the U.S. will cut tariffs on Chinese imports from 145% to 30%, while China will lower its duties on American goods from 125% to 10%.
In the wake of the announcement, the U.S. dollar strengthened against several currencies, and Treasury yields rose. Asian markets reacted positively, with Hong Kong’s Hang Seng Index jumping around 3%, and Europe’s Stoxx 600 index climbing about 1%. Oil prices, sensitive to global economic growth, surged over 3% as well.
Despite this rebound, investor sentiment remains cautious amid persistent volatility surrounding trade policy announcements. George Saravelos, Deutsche Bank’s global head of foreign exchange research, characterized the recent developments between the U.S. and China as a “highly stage-managed de-escalation.” He pointed out that China, facing a considerable trade surplus with the U.S., now faces a significantly reduced tariff of 30%, while the recent agreement with Britain resulted in a more balanced 10% tariff.
Over the weekend, Washington and Beijing held their first talks since escalating trade tensions, leading to low expectations for meaningful reductions in tariffs. However, both sides indicated notable progress, contributing to modest stock gains across Japan, South Korea, and mainland China. The details of the tariff agreement were shared late afternoon in Asia, after most trading sessions had concluded.
Takahide Kiuchi, an executive economist at the Nomura Research Institute in Tokyo, remarked, “The conflict between the United States and China over tariffs has passed a major hurdle,” suggesting that it is unlikely U.S. tariffs will exceed 100% again, given concerns about the impact on the U.S. economy. Stocks particularly sensitive to global trade welcomed the news, with companies like A.P. Moller-Maersk and Hapag-Lloyd seeing jumps of over 10%.
Economists have warned that ongoing U.S.-China tensions pose significant risks for global economic stability. The World Trade Organization predicts that the division of the global economy into rival blocs could result in a long-term global GDP decline of nearly 7%. Furthermore, the International Monetary Fund recently downgraded its 2025 growth outlook for all Group of 7 nations, largely attributed to U.S. tariffs.
Original Source: https://www.nytimes.com/2025/05/11/business/us-china-trade-stock-market.html
Category : Stocks and Bonds,International Trade and World Market,China,United States,Japan,Customs (Tariff)
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Publish Date: 2025-05-12 18:02:00
