Key Highlights:
- The U.S. and China reached a temporary trade agreement after weekend talks in Switzerland.
- Both sides agreed to cut reciprocal tariffs from over 100% to just 10% for 90 days.
- However, the U.S. will keep 20% tariffs on fentanyl-related products from China.
- Global markets rallied, with Wall Street eyeing further gains.
Markets celebrated on Monday as a major breakthrough was made in the ongoing U.S.-China trade war. After a closed-door meeting in Geneva, the Trump administration announced a 90-day deal with China to sharply reduce tariffs on both sides.
Under this agreement, reciprocal tariffs will fall to 10% from previously over 100%. While fentanyl-related tariffs will remain at 20%, the overall duty on Chinese goods will now be 30%, easing pressure on both economies.
Markets React Positively Worldwide
The news sent global stock markets soaring:
- Europe’s Stoxx 600 rose 0.83%
- Germany’s DAX reached a 1-year high
- Hong Kong shares climbed around 3%
- Nasdaq futures gained 3.8%
- S&P 500 futures jumped 2.8%
- Dow futures rose 3.1%
Analysts Call the Deal ‘Better Than Expected’
Experts across the financial world hailed the deal as a game-changer:
- JPMorgan’s Tai Hui said the tariff cuts exceeded expectations but noted uncertainty over what happens after 90 days.
- Mizuho Bank’s Jordan Rochester called it “much better news”, predicting the end of the “Sell America” narrative.
- The deal reduced the effective U.S. tariff rate from 108.8% to 27%, far better than forecasts.
Impact on U.S. Assets and Federal Reserve
The U.S. dollar index rose 1%, while the 10-year Treasury yield climbed 6 basis points. Analysts believe the Federal Reserve may now face less pressure to cut interest rates.
Bullish Outlook from Wall Street
- Barclays said stocks could “overshoot” as investor positioning remains cautious.
- Deutsche Bank strategists are now bullish on U.S. stocks, especially in sectors exposed to tariffs like tech, autos, and healthcare.
- Wedbush’s Dan Ives described the deal as a “dream scenario” and expects tech stocks to hit new highs in 2025.
Global Trade Boost and Shipping Rally
The agreement also lifted hopes for global trade recovery:
- Sydbank’s Mikkel Emil Jensen said the deal removes major uncertainty from world trade, even if it’s temporary.
- Maersk shares jumped over 12% as shipping demand is expected to rise.
- Companies may begin stocking up inventories in case talks fall apart after 90 days.
Final Thoughts
While the deal is only temporary, it offers a significant de-escalation in the trade conflict. Investors are hopeful that ongoing negotiations will lead to a more permanent resolution and a stronger global economic outlook.
