In a stunning pivot from months of economic tension, the U.S. and China have agreed to slash tariffs on each other’s goods from a punishing 125% down to 10%, sparking immediate gains across global markets.
The announcement came early Monday morning after closed-door negotiations in Geneva wrapped over the weekend. Both governments said the move would suspend most tariffs for 90 days, opening the door to more comprehensive trade talks set to begin later this month.
What’s in the deal?
- U.S. “reciprocal tariff” drops from 125% to 10%
- China’s retaliatory tariffs also fall to 10%
- Fentanyl-linked tariff remains at 20% as per the U.S. administration
- New round of talks will be led by Treasury Secretary Scott Bessent, Trade Rep. Jamieson Greer, and Chinese Vice Premier He Lifeng
Immediate Market Reactions
Global markets erupted with optimism:
- FTSE 100: ▲ 0.45% to 8,593.63
- DAX (Germany): ▲ 1.07% to 23,751.41
- CAC 40 (France): ▲ 1.38% to 7,850.78
- SX5P (Euro Stoxx 50): ▲ 0.68% to 4,493.53
- FTSE MIB (Italy): ▲ 1.65% to 40,018.86
- IBEX 35 (Spain): ▲ 0.75% to 13,655.50
- FTSE 250: ▲ 1.11% to 20,731.15
Meanwhile, Nasdaq-100 futures surged more than 3%, with traders betting on a rebound for tech giants that have been hit hardest by the U.S.–China trade freeze.
The U.S. dollar jumped, especially against Asian currencies, and bond yields rose, a signal that investors expect economic activity to pick up if trade resumes.
Why It Matters
The U.S.–China trade war has left deep scars. Since Trump’s aggressive tariff strategy launched, bilateral trade collapsed, U.S. companies scrambled for alternative suppliers, and consumers faced rising prices.
Industries like:
- Automotive
- Semiconductors
- Consumer electronics
- Agriculture
…were particularly hard-hit.
Now, with tariffs drastically reduced, global supply chains may finally start to heal, at least temporarily.
A 90-Day Lifeline or Just a Breather?
This is not a full resolution, but it’s the first major de-escalation in nearly a year. The 90-day window buys negotiators time, but also adds pressure: Markets are now priced for peace.
If talks collapse or stall, the risk of tariffs snapping back is real, and so is the chance of another market whiplash.
What’s Next?
- U.S. and Chinese officials begin formal talks within two weeks
- Markets will watch Treasury yields, consumer sentiment, and inflation data for confirmation that confidence is returning
- Tech, manufacturing, and shipping stocks likely to benefit first
- The 20% fentanyl-linked tariff could still pose friction, China has previously rejected the accusation
Final Word
This tariff rollback is a game-changer for now, but whether it’s a turning point or a tactical pause depends on what happens next in Washington and Beijing. The world’s two biggest economies have put their trade war on hold, but the damage isn’t easily undone, and 90 days is a short leash.
Stay tuned. The markets are watching.
