Global stocks rose after the US and China agreed to de-escalate their ongoing trade war by heavily reducing tariffs on each country’s goods for 90 days.
Stock markets around the world moved higher on Monday as news broke of a major trade agreement between the US and China. Following key trade talks between government representatives in Switzerland over the weekend, both countries have committed to slashing tariffs on each other’s goods for 90 days, starting 14 May.
In a major de-escalation of the ongoing trade war between the two nations, both sides will cut tariffs by 115%. This means that, from Wednesday, US tariffs on Chinese imports will fall to 30%, while Chinese tariffs on US goods will drop to 10%.
US stock futures climbed on Monday morning, with the Dow Jones Industrial Average futures (YM=F) gaining 1,009 points, a rise of 2.4%. Elsewhere, the S&P 500 futures (ES=F) saw a rise of 3.1%, while the Nasdaq-100 futures (NQ=F) surged 4.1%.
Meanwhile, Hong Kong’s benchmark Hang Seng Index jumped on the news, ending the day up 2.98% at 23,549.46. The Hang Seng Tech index also saw gains, advancing by 5.16% (5,447.35) to reach its highest levels since 27 March. As for China, Shanghai’s SSE Composite Index rose 0.8%, with the Shenzhen Component Index increasing 1.7%.
Over in Europe, stock markets also traded higher, with the Stoxx Europe 600 up by 1% on Monday morning. In the UK, the FTSE 100 rose 0.42%, Germany’s DAX moved 1.2% higher and France’s CAC 40 climbed 1.6%.
Elsewhere, the price of benchmark Brent crude increased to $65.94 a barrel, a rise of more than 3%. US West Texas Intermediate (WTI) crude futures were trading up $2.06, or 3.38%, at $63.08. As for gold prices, the value of the yellow metal fell around 3%, down to $3,224.34 an ounce.
What have the US and China agreed to?
Full details of the deal have yet to emerge, due to the rather complicated ongoing tariff situation. However, based on the statements provided so far, the US and China have agreed to the following:
- The US will lower its tariffs on Chinese goods from 145% to 30%, while China will reduce its tariffs on US imports from 125% to 10%
- China’s commerce ministry said the two sides agreed to cancel 91% in tariffs on each other’s goods and suspend another 24% in tariffs for 90 days. Therefore, the total reduction has been reduced by 115 percentage points
- China also agreed to suspend or remove other measures it has taken since 2 April in response to the US tariffs
What have the US and China said?
In a joint statement, both sides noted “the importance of a sustainable, long-term, and mutually beneficial economic and trade relationship.” The US and China also agreed to establish “a mechanism to continue discussions about economic and trade relations.”
This would be led by Chinese Vice Premier He Lifeng, US Treasury Secretary Scott Bessent and US trade representative Jamieson Greer.
Upon announcing the agreement, Bessent said: “The consensus from both delegations this weekend is neither side wants a decoupling. What had occurred with these very high tariffs was the equivalent of an embargo, and neither side wants that.
“We do want trade, we want more balanced trade, and I think that both sides are committed to achieving that,” Bessent went on to say.
China’s commerce ministry said the deal represents an important step to “resolve differences” and “lay the foundation to bridge differences and deepen cooperation” between the two nations. The ministry added: ”We hope the US. side will continue to work with China to thoroughly correct the practice of unilateral increases.”
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