Published by Global Banking & Finance Review®
Posted on May 12, 2025
4 min readLast updated: January 23, 2026
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A US-China tariff truce boosts global stocks, but investors remain cautious about a final deal amid ongoing economic risks.
By Amanda Cooper and Samuel Shen
LONDON/SHANGHAI (Reuters) -A breakthrough in U.S.-China trade talks has propelled world stocks and the dollar higher, but investors fear further negotiations could prove a long slog, tempering optimism, as risks of a global economic slowdown persist.
Speaking after two days of talks with Chinese officials in Geneva, U.S. Treasury Secretary Scott Bessent said on Monday the two sides had agreed a 90-day pause on measures and that tariffs would fall by over 100 percentage points.
That leaves U.S. tariffs on Chinese goods at 30% from May 14 to August 12 and Chinese duties on U.S. imports at 10%, beating investors' best-case scenarios going into the talks.
The dollar jumped by the most in almost a month against a basket of major currencies, as the yen and Swiss franc fell along with other safe-haven assets like gold and government bonds.
S&P 500 stock futures leapt almost 3%, suggesting a hefty rally at the opening bell, while U.S. Treasury prices sagged, sending yields to one-month highs above 4.4%.
But relief that the worst of a global trade war could be avoided was tempered by caution, given a more permanent deal needs to be struck and that higher tariffs overall are still likely to weigh on the global economy.
"It's long-term positive plus 90 days of uncertainty," said Charles Wang, chairman of Shenzhen Dragon Pacific Capital Management Co.
Michael Metcalfe, head of macro strategy at State Street Global Markets in London, estimated that Monday's U.S.-China trade deal implied an average effective tariff rate of around 15%.
"Given where expectations were, it's a net positive," he said. "You basically reverse the reciprocal tariff announcement, and if you reverse the reciprocal tariff announcement you are back to square one."
After taking office in January, U.S. President Donald Trump had imposed tariffs of 145% on imports of Chinese goods, with China in turn raising tariffs on U.S. goods to 125% and limiting exports on some vital rare earth minerals.
Those measures had brought nearly $600 billion in two-way trade to a standstill, disrupting supply chains and sparking fears of an immediate cratering of the global economy.
Trump's April 2 "Liberation Day" announcement of sweeping tariffs on China and others sparked a sharp exit from U.S. assets, including the dollar and Treasuries - the mainstays of the global financial system - before being paused.
Heightened uncertainty caused by U.S. trade policy has hurt business and consumer confidence. The dollar index, while up over 1% on Monday, remains down some 7% so far this year.
SOFTENING STANCE
Reassuring for markets are signs that Trump may be rethinking his trade strategy, given the damage caused already, as economic indicators have turned south and central bankers warn of the risk of slowing growth and rising inflation.
A deal last week with Britain, plus positive noises from Japan, Vietnam and South Korea, have helped restore some confidence, along with a cooling in geopolitical tensions.
U.S. stocks are already roughly where they were prior to April 2, while beneficiaries of the "sell America" trade, such as European and Chinese stocks have given up a big chunk of those gains.
"This is only a three-month temporary reduction of tariffs. So this is the beginning of a long process," Zhiwei Zhang, chief economist at Pinpoint Asset Management in Hong Kong, said.
"The two sides will spend months probably, to come up with a resolution, or reach a final trade deal, but this is a very good starting point."
Rabobank's head of FX strategy Jane Foley said there was more optimism that the tariffs will not have the devastating impact many had feared, but this did not mean a return to the pre-Trump status quo.
"The overall scenario is not as bad as it could have been, but we still have a fair amount of uncertainty about where these tariffs will settle, their impact on world growth and central bank policy," she said.
State Street's Metcalfe said as uncertainty over trade lifts, the focus could also turn to other hot spots - such as Trump's plans for tax cuts and what that means for U.S. debt levels, especially as revenues from tariffs drop.
"It (the U.S./China deal) doesn't mean the policy uncertainty has gone away, it's moved on to a new area," he said.
(Reporting by Alun John, Amanda Cooper and Dhara Ranasinghe in London, Samuel Shen in Shanghai and Summer Zhen in Hong Kong; Graphic by Amanda Cooper; Editing by Dhara Ranasinghe and Catherine Evans)
The article discusses the US-China tariff truce and its impact on global markets and investor sentiment.
Global stocks and the dollar have risen, but investors remain cautious about the long-term economic impact.
Investors are worried about the uncertainty of a final trade deal and the potential for a global economic slowdown.
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