Markets find respite in US-China surprise tariff suspension

WASHINGTON/NEW YORK

Markets received a breather after a surprise 90-day tariff suspension between the US and China.

It came after a high-level dialogue in Geneva last weekend, giving rise to optimism in global markets.

An agreement between the two largest economies in the world seemed unlikely with escalating tariff tensions. Following two days of talks in Switzerland, the US and China issued their first joint statement on trade in years.

As of Wednesday, the US will reduce tariffs on Chinese goods from 145% to 30% and China will lower its tariffs on US goods from 125% to 10% for 90 days.

Global markets were relieved with the developments as concerns about a global recession eased with the agreement.

Before the announcement of the tariff suspension, Japan’s Nikkei 225 closed with a 0.4% increase, South Korea’s Kospi Index was up 1.2%, and China’s Shanghai Composite Index added 0.8%.

Hong Kong Special Administrative Region (SAR) Hang Seng Index soared 3% after the announcement and risk appetite recovered in regional indexes except Hong Kong SAR, while the Nikkei 225 closed Monday up 1.5%, in line with the rise in US indexes.

The easing of trade tensions positively affected European stocks.

The Stoxx Europe 600 benchmark index climbed 1.2%, Germany’s DAX 40 was up 0.3%, the UK’s FTSE 100 added 0.6%, Italy’s FTSE MIB 30 gained 1.4%, Spain’s IBEX 35 added 0.8%, and France’s CAC 40 was up 1.4%.

US markets suffered heavy losses when US President Donald Trump’s sweeping reciprocal tariffs were announced April 2, but the tariff suspension brought much-needed recovery, rallying stocks

The Dow rose 2.8%, the S&P 500 added 3.3% and the NASDAQ was up 4.4% on Monday. The fear index VIX, showing fluctuations in the S&P 500, fell 17% to 18.2, returning to the level before April 2.

The US Dollar Index rose 1.4% to 101.8, its highest since April 10, at the closing bell. The US dollar gained 2% against the Japanese Yen, 1.4% against the euro and 1% against the British pound.

The 10-Year Treasury bond yield climbed 10 basis points to 4.48.

Gold declined from its record-breaking course with the agreement.

Trade talks to continue

The White House said an agreement was reached on the framework for future talks with China to reduce tariffs, lift retaliatory measures and maintain the US’ basic tariff rate. The parties agreed to establish a mechanism to continue trade talks.

The US and China pledged to stop the flow of fentanyl from China. US Treasury Secretary Scott Bessent said after the agreement that the two sides could meet again in the coming weeks.

Trump said at a news conference Monday that China will suspend and remove all non-monetary barriers against the US and the most important outcome of the high-level dialogue was that China agreed to open its economy.

But he said if a long-term agreement can't be reached, tariffs would rise again.

Last year, the US-China trade volume exceeded $584 billion. The US exported goods worth $144 billion to China, with Chinese imports to the US totalling $439.8 billion.

The US ran a trade deficit of $1.2 trillion, and the highest portion of that figure was with China at $295.2 billion.

Retailers rejoice, expert says suspension can pave way for future agreements

Matthew Shay, president of the National Retail Federation (NRF), said the developments have encouraged retailers as tensions ease, welcoming the tariff suspension as a critical step to provide short-term relief to retailers and other businesses ahead of the holiday season.

Shay stated that the agreement will bring significant progress toward more fair and balanced trade relations between the US and China in the long term.

Steven Kamin, senior fellow at the American Enterprise Institute, told Anadolu that the agreement is a good sign after concerns of a trade war lasting for months, and bringing serious damage to the global economy. He said the surprise and quick agreement could pave the way for future agreements with other countries.

Kamin expects the average US tariffs to be 10 to 15 points higher than the pre-Trump era, however, he said it is still a point of concern.