#TradeWarEases On May 12, 2025, the United States and China announced a significant easing of their ongoing trade war, agreeing to a 90-day truce that includes substantial tariff reductions.

Key Details of the Agreement

Tariff Reductions: The U.S. will lower tariffs on Chinese goods from 145% to 30%, while China will reduce its tariffs on U.S. goods from 125% to 10%.

Scope of Relief: Both countries have agreed to cancel 91% of existing tariffs and suspend an additional 24% during the 90-day negotiation period.

Negotiation Framework: The agreement was reached during talks in Geneva, led by U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng.

Additional Commitments: China has also pledged to suspend or cancel certain non-tariff measures against the U.S., aiming to foster a more stable trade relationship.

Market Reactions

The announcement led to a surge in global markets:

U.S. Stock Futures: The S&P 500 futures rose by 2.8%, and the Dow and Nasdaq E-minis also showed significant gains between 2% and 3.5%.

Investor Sentiment: The CBOE Volatility Index dropped below 20 points, indicating reduced market fears.

Sector Performance: Technology and chipmakers like Nvidia, AMD, and Marvell Technology posted substantial premarket gains, while energy stocks rose alongside crude oil prices.

Outlook and Considerations

While this truce marks a positive step toward resolving trade tensions, analysts caution that it is a temporary measure. Underlying issues remain unresolved, and the potential for future disruptions persists if deeper structural concerns are not addressed.

Both nations have expressed a commitment to continued dialogue, with hopes of achieving a more comprehensive and lasting agreement that promotes global economic stability.