In a dramatic turn that sent global markets soaring, the United States and China announced a breakthrough 90-day trade deal slashing tariffs from over 100% to 10% on both sides. The announcement triggered one of the largest single-day market rallies in recent memory, providing relief to investors who feared a prolonged global trade war.
Global stock markets surged on Monday after the agreement to temporarily slash steep tariffs for 90 days. The breakthrough comes after months of escalating tensions, during which Trump imposed tariffs of 145% on Chinese goods, prompting China to retaliate with levies of 125%.
This temporary truce represents a critical step back from economic disaster, with both nations recognising the urgent need to prevent further damage to global trade stability.
The deal reduces U.S. tariffs on China to 30% from 145%, while China cuts tariffs on the U.S. to 10% from 125%. Key details include:
The breadth signals that both nations recognise that prolonged tensions could severely damage global economic stability.
The market reaction was spectacular. U.S. stock futures pointed to a strong rally:
Corporate stocks hammered by trade fears saw remarkable recoveries. Apple surged on prospects of supply chain relief, while Tesla jumped on optimism for the China market. Boeing rose on an improved export outlook.
"It's a relief rally because there was anxiety about tariffs between the U.S. and China," said John Praveen, managing director at Paleo Leon. The world's two biggest economies are working to avoid worst-case tariff scenarios.
Global shares rallied while gold and safe-haven currencies slumped against a resurgent dollar. European and Asian markets posted solid gains, with emerging markets benefiting from a reduction in global trade tensions.
While markets celebrated immediate relief, economists remain cautiously optimistic about long-term prospects. The 90-day window provides a crucial time for comprehensive negotiations.
Washington seeks to reduce its $295 billion goods trade deficit with Beijing and persuade China to renounce what it calls a mercantilist economic model. Key challenges include structural economic reforms, issues related to technology transfer, and improvements in market access.
Different sectors experienced varying benefits. Technology companies with exposure to China saw immediate gains as supply chain concerns eased. Manufacturing rallied on prospects of reduced input costs, while agriculture gained on hopes of expanded market access in China.
The countries' total trade in goods topped $582 billion last year, underscoring the importance of finding a sustainable solution. The coming weeks will be critical as negotiators work to build on this breakthrough.
Market participants remain watchful for signs of progress. The temporary nature means sustained optimism requires concrete progress toward a comprehensive deal. Both nations have strong economic incentives to reach a lasting agreement, but significant structural issues remain unresolved.
The success of these negotiations could determine not only US-China trade relations but also the broader trajectory of the global economy ahead.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Market conditions can change rapidly; readers should consult with a qualified financial advisor before making investment decisions.