U.S. and China Agree to 90-Day Tariff Truce, Markets Rally on De-escalation Hopes

In a significant step toward easing trade tensions, the United States and China announced on Monday a 90-day pause on escalating tariffs, marking a rare moment of collaboration between the world’s two largest economies. The agreement includes mutual reductions in import duties, providing a temporary reprieve from a standoff that has rattled markets and threatened global growth.

Key Points of the Agreement

• U.S. tariffs on Chinese goods will be reduced to 10%, down from a peak of 145% imposed earlier this year.
• A 20% tariff targeting China’s alleged role in the fentanyl trade will remain in place.
• China will lower its retaliatory tariffs on U.S. goods to 10%, from 125% previously.
• Both nations issued a joint statement, signaling further working-level consultations and negotiations in the weeks ahead.

Market Reaction

The announcement triggered a broad rally in global financial markets:

• U.S. stock futures surged, building on weekend momentum as investors priced in optimism for a more stable trade environment.
• The U.S. dollar strengthened against major currencies, while China’s yuan appreciated, reflecting renewed confidence in the trade outlook.

Lingering Concerns

Despite the temporary easing, analysts noted that the current tariff levels remain significantly elevated compared to the start of President Donald Trump’s second term. Tariffs on steel, aluminum, and automobiles remain in place, along with a universal 10% baseline duty on most imports.

Treasury Secretary Scott Bessent previously warned that the earlier tariff structure was tantamount to a “trade embargo,” and while the latest move represents progress, markets remain wary of a full resolution.

Looking Ahead

The 90-day window now opens the door to potential breakthroughs or setbacks, depending on how subsequent negotiations unfold. With both economies facing internal economic pressures, the truce is seen as a pragmatic step toward avoiding further damage—but a comprehensive deal still appears distant.

Investors will be closely watching upcoming bilateral discussions, any updates to tariff schedules, and broader global economic indicators to assess whether this ceasefire leads to lasting trade normalization.