U.S.-China 90-Day Tariff Truce Ignites Global Market Rally

NEW YORK -- A provisional 90-day tariff truce between the United States and China, brokered during weekend discussions in Geneva, has sent a wave of optimism through global financial markets. The agreement temporarily de-escalates the trade conflict between the world's two largest economic powers, offering a reprieve from escalating duties. This development has prompted an immediate and significant rally in stocks and the U.S. dollar.

Under the terms of this interim accord, the U.S. will substantially reduce its tariff rate on Chinese imports from a staggering 145% down to 30%. In a reciprocal move, China has committed to lowering its tariffs on U.S. imports from 125% to 10%. These revised rates are set to take effect from May 14 and will remain in place until at least August 12.

Financial markets responded with vigor to the news. Global stock exchanges, from Hong Kong to Frankfurt, experienced notable gains. Wall Street futures surged, with S&P 500 contracts climbing 2.7% and Nasdaq 100 contracts jumping 3.8%. The S&P 500 closed at its highest point since March 3, rising 3.3% to surpass levels seen before sweeping global tariffs were announced on April 2. The Dow Jones Industrial Average also saw a dramatic increase of 1,100 points.

The U.S. dollar strengthened considerably, gaining 0.9% against other major currencies, with the dollar index rising over 1% on Monday. Conversely, gold prices, often a safe-haven asset, declined as immediate economic anxieties eased. U.S. Treasury prices fell, pushing yields to a one-month peak above 4.4%, reflecting a shift away from safer investments.

This market behavior reflects a classic "risk-on" sentiment spurred by the tariff truce. Reduced economic fear boosts confidence in the U.S. economy, strengthening the dollar as investors buy U.S. assets. Gold's appeal as a safe haven wanes, and a stronger dollar further pressures its price. Meanwhile, investors often sell safer U.S. Treasury bonds to chase higher returns in assets like stocks, causing Treasury prices to drop and yields to climb, reflecting a greater market appetite for risk over caution.

Despite the positive market reaction, analysts and investors maintain a degree of caution. This temporary ceasefire does not resolve the fundamental disagreements fueling the trade conflict, including the substantial U.S. trade deficit with China and President Trump's ongoing insistence that Beijing address the fentanyl crisis. Businesses are still seeking greater clarity and a more permanent resolution.

The truce is widely viewed as a short-term positive, but the path to a comprehensive and enduring trade agreement is anticipated to be protracted. Even with these reductions, U.S. import tariffs are likely to remain higher than before the Trump administration's assertive trade policies. There is a concern that these could still be the highest U.S. tariffs in nearly a century, and policy uncertainty may now pivot to other domestic issues such as U.S. tax cuts and national debt levels as tariff revenues potentially decline.