The global financial markets erupted in optimism on Monday following a landmark agreement between the United States and China, signaling a significant breakthrough in their ongoing trade tensions. Described by President Trump as a “total reset,” this deal has slashed tariffs dramatically, fostering hope for renewed economic cooperation between the two superpowers. Investors responded with enthusiasm, driving share prices upward as the Dow Jones, S&P 500, and Nasdaq recorded substantial gains.
- US and China agreed to reduce tariffs significantly, with US tariffs dropping from 145% to 30% and China’s retaliatory tariffs falling from 125% to 10%.
- The agreement includes a 90-day suspension of higher levies, with potential for further negotiations to prevent re-escalation.
- Markets reacted positively, with the Dow and S&P up over 2.5%, Nasdaq rising 3.3%, and shipping companies like Maersk and Hapag-Lloyd seeing double-digit gains.
A Game-Changing Breakthrough in Trade Relations
The breakthrough, finalized during weekend talks in Switzerland, marks a pivotal moment in de-escalating the high-stakes tariff war that has disrupted global trade since the US introduced its “Liberation Day” universal tariff policy on April 2. The policy targeted 60 trading partners, with China facing some of the steepest levies. In response, Beijing imposed retaliatory tariffs, leading to a spiral of economic measures that rattled markets and slowed factory output in China.
Under the new deal, the US has reduced its reciprocal tariff on Chinese goods to 10%, with the higher rates suspended for 90 days. China has mirrored this move, lowering its retaliation tariffs to 10% and agreeing to suspend or remove non-tariff measures against the US. While sector-specific tariffs, such as those on steel and cars, remain, both sides have canceled additional retaliatory tariffs introduced during the trade war.
Why This Breakthrough Matters for Businesses
The breakthrough has immediate implications for businesses on both sides of the Pacific. In the US, retailers and manufacturers reliant on Chinese imports can breathe a sigh of relief as lower tariffs reduce costs ahead of the winter holiday season. The National Retail Federation hailed the deal as a “critical first step,” providing short-term relief for businesses navigating supply chain challenges. Meanwhile, in China, exporters like Tat Kei, who runs a personal care appliance factory in Shenzhen, welcomed the reprieve but remain cautious about future uncertainties.
The deal also boosts confidence in global shipping, with companies like Maersk and Hapag-Lloyd seeing share prices soar by 12% and 14%, respectively. Maersk described the agreement as a “step in the right direction,” expressing hope for a permanent deal to ensure long-term predictability for customers.
Markets Celebrate the Breakthrough
Wall Street was quick to embrace the breakthrough, with major indexes posting significant gains. Retail giants like Target, Home Depot, and Nike saw sharp increases in their share prices, while tech leaders such as Nvidia, Amazon, Apple, and Meta also surged. European markets followed suit, and Hong Kong’s Hang Seng Index closed 3% higher. The positive sentiment even lifted shipping stocks, reflecting optimism about restored trade flows.
However, not all markets reacted uniformly. The gold price, often a safe-haven asset during trade disruptions, fell 3.1% to $3,223.57 an ounce, signaling reduced fears of economic instability. The International Chamber of Commerce praised the deal, noting it sends a clear signal that both nations are keen to avoid a “hard decoupling” of their economies.
Challenges and Cautions Post-Breakthrough
Despite the optimism, some industry voices remain wary. Elaine Li, head of Greater China at Atlas Ways, suggested that Chinese firms view the tariff suspension as temporary and are preparing for potential future rounds of trade disputes. President Trump’s remarks that tariffs could rise again in three months if progress stalls have fueled this caution. Additionally, the US is maintaining a 20% tariff to pressure China on the illegal fentanyl trade, indicating that not all tensions have been resolved.
For now, the breakthrough has provided a much-needed respite for global markets and businesses. As both nations prepare for further talks, with Trump indicating a possible conversation with President Xi Jinping later this week, the world watches closely to see if this deal will pave the way for lasting trade stability.
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