On May 12, 2025, the United States and China reached a significant agreement to ease their ongoing trade war by mutually reducing tariffs for a 90-day period. The U.S. will lower tariffs on Chinese goods from 145% to 30%, while China will reduce its tariffs on U.S. imports from 125% to 10%. This temporary truce, effective until August 10, aims to provide relief to businesses and consumers affected by the prolonged trade tensions .
Market Reactions
The announcement sparked a significant rally in global financial markets. In the U.S., the Dow Jones Industrial Average surged by over 1,100 points (approximately 2.8%), while the S&P 500 and Nasdaq saw gains of 3.3% and 4.4%, respectively. These increases represent the largest single-day gains for these indices since April 9 . Investor optimism was fueled by the potential for reduced costs and improved trade relations between the two economic powerhouses.
Impact on Industries
The tariff reductions are expected to benefit various sectors, particularly those heavily reliant on international trade. Consumer-focused companies, such as cruise operators, furniture retailers, and athletic wear brands, experienced notable stock gains. For instance, furniture retailers Wayfair and RH saw their shares jump by over 21% and 17%, respectively . Additionally, technology giants like Apple, Amazon, and Nvidia also witnessed significant stock price increases .
Caveats and Ongoing Concerns
Despite the positive market response, experts caution that the truce is temporary and does not eliminate all trade barriers. Some U.S. tariffs, particularly those related to steel, automobiles, and fentanyl imports, remain in place . Furthermore, underlying issues such as China's currency practices and manufacturing subsidies continue to be points of contention. Businesses are advised to remain vigilant and consider diversifying their supply chains to mitigate potential future disruptions.