In an unqualified win for international trade, the United States and China have agreed. Reiterate their 90-day pause on tariffs, as stated in Geneva on May 12, 2025. U.S. Treasury Secretary Scott Bessent TAA & U.S. Trade Representative Jamieson Greer TAA, Press Conference. They pointed to the “substantial progress” achieved after two days of back room talks between chief negotiators from each country. Analysts view this agreement as a major de-escalation in the ongoing U.S.-China trade war, which has caused uncertainty in international markets for years.
Mikkel Emil Jensen, a senior analyst at Danish lender Sydbank, said the significance of the agreement could not be overstated. He called it an important step that would help improve relations between the two economic heavyweights. The agreement represents an impressive cut to the effective U.S. tariff rate of a staggering 108.8% to 27%. This change, according to analysts like Jordan Rochester, the head of currency strategy EMEA at Mizuho Bank, will be bigger than expected.
The tariff suspension will likely continue to stoke a broad-based risk-on sentiment in the markets, with stocks and U.S. assets expected to see the most pronounced upside. Despite a lack of details, the announcement has already sent the market skyrocketing. As one sign that investors are starting to feel more confident, the U.S. dollar index rose by 1% on Monday morning.
The deal aims to address lack of transparency in global trade. We believe U.S.-China trade will recover rapidly once tariffs are removed. Since the announcement of the tariff increase in early April, both freight vessels and shipping containers have dropped. As logistics come down from historic, high levels, this trend should reverse.
Investment strategist Lindsay James from Quilter acknowledged that while the new deal allows for “a considerable proportion of trade [to] resume, albeit at slightly higher prices,” it does not quite replicate the pre-tariff conditions. She pointed out that it falls well below the 20% threshold that existed prior to what she terms “Liberation Day.” This gap, she says, is the most egregious.
Analysts say the short-term nature of this deal could still trigger a jump in trading activity in industries that have the greatest exposure to tariffs. This has yet to cover cars, medical, and semiconductor technology.
Emmanuel Cau noted that whenever we get a “pain trade to the upside,” stocks can overshoot. That would mean investors might see further outsized returns as optimism around the economy grows. In contrast, strategists at Deutsche Bank called the announcement a beat past their already-collaborative expectations.
“Today’s announcement even exceeds our constructive expectations.” – Strategists at Deutsche Bank
They were surprisingly hopeful about what lies ahead. They claimed, “this announcement is more than we hoped for, but better than the market would have anticipated back in March.” Their suggestions even led them to recommend investors “remain bullish and start reentering China tariff-exposed industries.”
Tai Hui made special note of the tariff reduction being bigger than expected. He underscored that this deal represents a huge turn-around for markets.
“The magnitude of this tariff reduction is larger than expected.” – Tai Hui
“Overall, we expect the market to get back on to a risk-on sentiment in the near term.” – Tai Hui
Soon after that announcement, Dan Ives called it “a massive victory for the market and bulls.” This comment points to the intense level of investor enthusiasm to capture potential growth.
Conversations continue, negotiations have been fruitful. All of this leads to some measured optimism for a continued thaw in U.S.-China relations, which would be a boon to international trade. Against this backdrop, analysts are betting that U.S. stocks will do better than their European counterparts in the near term.