- The U.S. And Chinese governments announced temporary relief to their trade war, though exact details must still be hammered out over the next few months.
The world’s two superpowers have reached an accord on their bruising trade war—for 90 days, at least. On Monday, the U.S. And Chinese governments announced they had agreed to slash reciprocal tariffs for 90 days as they continue to hammer out details on a broader deal. Markets soared on the news, with the S&P 500 gaining 3.26%.
Though Trump has imposed wide-ranging tariffs against all imports coming into the U.S. During his second term in office, China has been his primary target. Trump has argued that the Chinese government has not done enough to stem the flow of fentanyl into the U.S.
As part of Monday’s deal, both countries will reduce their so-called “reciprocal” tariffs from 125% to 10%, though a 20% tariff imposed by Trump related to fentanyl will remain—meaning U.S. Levies will be 30%. Treasury Secretary Scott Bessent hailed the agreement, describing it to reporters on Monday as “substantial progress” between the two countries. He told CNBC in an interview that he does not want a “generalized decoupling from China,” but rather a more strategic approach to make U.S. Supply chains more resilient.
Stocks surge
While investors expected booming markets under Trump’s second term, his insistence on a severe tariff campaign against many of the U.S.’s top trade partners has sent markets reeling. Stocks fell dramatically after Trump’s Liberation Day event in early April, where he introduced the tariff plan. Though they have largely recovered from the dip, markets have yet to rise to the levels achieved around his inauguration.
Monday’s announcement—the latest reversal by the Trump administration from its initial trade strategy—spurred stocks to rise to a two-month high. Though Bessent has argued that the administration is prioritizing moving manufacturing of key industries such as steel and semiconductors to the U.S., much of the country’s economy remains dependent on imports from China. On Monday, Trump described Monday’s deal as a “total reset,” while adding that it doesn’t apply to specific sectors such as cars, steel, and aluminum.
Still, the long-awaited accord represents a temporary pause, with investors still anxious for further clarity. Bessent told CNBC on Monday that the two countries would be meeting again in the next few weeks for a “more fulsome agreement.” He added in a later interview with Bloomberg that the reciprocal tariffs with China will likely not fall below 10%.
Wedbush analyst Daniel Ives argued on Monday that the deal meant new highs for the market—and tech stocks in particular—are possible for 2025. “These massive tariff reductions at this time likely take a recession off the table for now in our view,” he wrote. Apple’s shares rose 6.31% on Monday, while Amazon rose 8.07%.
A key question is still on the table for both countries: rare earth minerals. Dexter Roberts, nonresident Senior Fellow at the Atlantic Council, argued to Coins2Day that China will likely use the key resources, which are used in everything from smartphones to missiles, as a negotiating chip. “Dominating this sector is probably one of their most important sources of leverage over the U.S. And over the world,” he said.
