Today's Edition
The New York Times News Service
Stocks surged around the world after US and Chinese officials said they agreed to temporarily suspend most of the tariffs they have imposed on each other, the latest sign that trade policy announcements are the main driver of market movements since President Donald Trump returned to office.
Futures for the S&P 500 suggested that US stocks would open 3% higher when trading begins in New York on Monday morning, which would be the best day for the index since April 9, when a huge rally was spurred by Trump pausing his "reciprocal” tariffs on all countries except China. Futures for the tech-heavy Nasdaq climbed about 4%.
The apparent thaw in relations between the United States and China, even if temporary, was the latest concession offered by the Trump administration, which had sent stocks tumbling last month after announcing unexpectedly high tariffs on dozens of countries.
The S&P 500 dropped almost 20% below its peak in February, but it has since rebounded, recovering roughly two-thirds of its losses as various exemptions and pauses to US tariffs have been announced.
In a joint statement, released Monday after weekend talks in Geneva, the United States and China said they had reached an agreement to reduce their respective tariffs for 90 days while trade negotiations continue.
The United States would reduce the tariff on Chinese imports to 30% from its current 145%, while China would lower its import duty on American goods to 10% from 125%.
After the statement’s release, the US dollar strengthened against a wide range of currencies. US Treasury yields also rose.
Elsewhere, Hong Kong’s benchmark Hang Seng Index jumped about 3%, while Europe’s Stoxx 600 index rose about 1%. Oil prices, which are sensitive to expectations of global economic growth, also rose, gaining more than 3%.
Despite the recent recovery in markets, investors have remained anxious amid volatility on every presidential announcement about trade policy. The "highly stage-managed de-escalation” between the United States and China on Monday was notable for providing more clarity about the potential contours of Trump’s on-again, off-again tariff policy, said George Saravelos, the global head of foreign exchange research of Deutsche Bank.
He noted that China, which runs a huge trade surplus with the United States, now faces a 30% tariff while Britain, which has a relatively balanced trade relationship with the United States, reached an agreement last week that resulted in 10% tariffs for most goods. "It is reasonable,” Saravelos said, "that these two numbers now set the bounds of where American tariffs will end up this year, a material increase in visibility from just last week.”
Over the weekend, Washington and Beijing held their first meetings since ratcheting up tit-for-tat trade barriers on each other, effectively blocking much of the trade between the countries.
Before discussions began, investors had relatively low expectations for a breakthrough at the talks that would result in a meaningful reduction in tariffs. After the trade conversations concluded, however, officials from both sides touted significant progress.
That was enough to edge stocks higher in Japan, South Korea and mainland China. Details of the US-China tariff agreement were announced late in the afternoon in Asia, after most stock exchanges had stopped trading.
"The conflict between the United States and China over tariffs has passed a major hurdle,” said Takahide Kiuchi, executive economist at the Nomura Research Institute in Tokyo. The Trump administration is wary of tariffs dealing a major blow to the US economy and therefore it is unlikely that levies will be raised higher than 100% again, he said.
The stocks most exposed to global trade flows surged on the news. For example, A.P. Moller-Maersk and Hapag-Lloyd, two of the world’s largest shipping companies, jumped more than 10%.
Economists have warned that US-China trade tensions have significantly increased the possibility of an economic downturn.
The World Trade Organization has forecast that the continuing division of the global economy into "rival blocs” could cut global gross domestic product by nearly 7% over the long run. In April, the International Monetary Fund lowered its 2025 outlook for all Group of 7 major industrialised nations largely because of US tariffs.
