On Monday morning, US stocks experienced a significant uptick following an agreement between the White House and China to reduce trade tensions. They decided to implement a 90-day break in tariff escalations, which could be crucial for both economies.
The Dow Jones Industrial Average surged by 1,044 points, or 2.5%, with the S&P 500 and Nasdaq also seeing impressive gains of 2.9% and 4%, respectively.
Treasury Secretary Scott Bessent mentioned that weekend discussions with China held in Switzerland were “very productive.” Notably, both nations agreed to slash tariffs by 115% within this 90-day period.
This reduction means tariffs on Chinese goods will drop to 30%, while US imports from China will see reduced tariffs of 10%.
Interestingly, a separate 20% tax on Chinese imports linked to President Trump’s involvement in fentanyl smuggling will remain intact.
Bessent also expressed optimism about long-term trade agreements, suggesting that there would be further talks soon. “I think in the coming weeks, we’ll be back to discussing a more comprehensive agreement,” he told CNBC’s “Squawk Box.”
Stocks of tech and electronics companies soared, as many of these products are manufactured in China at lower costs. Apple’s shares, which heavily depend on Chinese production, jumped by 5.1%, while Amazon’s rose by 8.6%.
Consumer technology brands were also buoyed by the news, with Dell Technologies stock increasing by 7%.
Retailers specializing in TVs, laptops, and smart devices gained momentum as well, with Best Buy’s shares climbing 8.1%.
Carol Schlife, chief market strategist at BMO Private Wealth, remarked, “While this is a temporary agreement and establishes a framework for ongoing discussion, it indicates that tariffs will be significantly lower than previously anticipated.”
The 90-day pause is well-timed for retailers gearing up for the critical back-to-school and holiday shopping seasons.
Prior to this announcement, both consumers and businesses were bracing for sudden additional costs due to tariffs. Although the new tariff rates will still raise prices, they are considerably milder than the previous steep increases of up to 145% that Trump implemented last month.
Interestingly, this volatility began when Trump unveiled stringent tariffs on what he dubbed “liberation day.”
“While the truce in the trade war with China is encouraging, basic tariff levels remain higher than they were previously, and some damage could be addressed in the coming months,” Schlife noted.
The ongoing trade conflict has already impacted economic reports, with GDP contracting in the first quarter of 2025 as US companies rushed to import goods ahead of impending tariff deadlines.
Simultaneously, imports from China to US ports are dwindling, with small businesses reporting that rising costs have led them to delay or cancel orders.
