Global markets have taken a breath since a temporary truce in the escalating U.S.-China trade war, which sent markets into a tailspin for weeks. The recent threat of a return to higher tariffs has rocked financial markets and fragmented supply chains worldwide. But Monday's announcement of a 90-day cease-fire in any tariff escalation has set off a powerful stock rally, even as it raises questions about whether the truce will lead to enduring trade peace.
Global stock markets leapt after the United States and China said they had agreed to scale back steep tariffs for the next three months. The decision is a temporary effort to defuse tensions so that they do not fuel further instability in the global economy, analysts said.
Under the agreement, the U.S. will reduce its tariffs on Chinese goods from 145% to 30%. China will reduce its 125% tariffs to 10% for American products. The weekend discussions in Geneva resulted in the agreement, which will immediately take effect.
China will also remove export controls on rare earth minerals and high-tech components. These are essential materials for electronics, defense, and green energy. U.S. Trade Representative Jamieson Greer said in a television interview that those measures were modified.
The financial response was immediate. Wall Street rose, with the S&P 500 reaching its highest level since March and the Nasdaq Composite ending higher than it had since February. The U.S. dollar rallied, and gold prices fell slightly, signaling a calmer period in markets.
Yet the truce did not address the underlying problems that led to the trade dispute. These include the large American trade deficit, Beijing's industrial subsidies, and worries about fentanyl-related materials coming from China.
President Donald Trump praised the agreement as a victory for his hard-nosed trade position. In comments at the White House, he said China had "agreed to allow us to bring in other partners, apart from the two major economies — we were going to have a big deal this summer, and they would rather not do it, so we'll do a very big deal." He characterized the result as "fantastic" for the United States and for China. Still, several of Trump's tariffs from his first term are standing, with a 100% tariff on electric vehicles and a 50% tariff on solar products in the mix.
Scott Bessent, the Treasury Secretary, who headed the negotiations, described the agreement as a "step toward balanced trade." Both countries are committed to avoiding economic decoupling, and the discussions will go on, he said, although they have no future meeting date set.
China's state media took a conciliatory tone, referring to the agreement as evidence of deep economic interdependence and mutual gain. It was a departure from its more combative posture one week earlier.
Trump's backers say he is delivering on his pledge to restore American manufacturing. But opponents, including small business owners and consumer advocates, argue that the tariffs have hurt U.S. buyers and have disrupted business planning.
Scott Kennedy, a trade expert in Washington, said the deal reflects an American retreat more than Chinese concession. He observed that even though China has scaled back its retaliatory actions, fundamental structural problems are unresolved.
Retailers and importers were cautious in their response. Some, such as Abt Electronics in Chicago, are drawing down stockpiles assembled before tariffs hit. "Consistency is what everybody wants, and that has been the tough part," said co-president Mike Abt.
At the Port of Los Angeles, the busiest facility in the country for Chinese products, the executive director, Gene Seroka, said that he anticipates a short-term surge in shipments. But he cautioned that many businesses will take their time before placing big orders.
The agreement does not bring back "de minimis" exemptions for low-value e-commerce shipments, an issue of tension for small businesses and online sellers.
Even with the reprieve, the uncertainty endures. A week before the deal, Trump had threatened 80% tariffs. Businesses are warning of impending volatility.
The 90-day pause now leaves them both room to negotiate. Yet without movement on deeper trade issues, the prospect of a fresh clash remains high.
