The announcement of a 90-day tariff truce between the United States and China has led to significant market optimism, boosting global stocks, the US dollar, and reducing safe-haven assets like gold. Under this temporary agreement, tariffs on Chinese goods to the US have been reduced from 145% to 30%, while tariffs on US goods to China have decreased from 125% to 10%. This development has been warmly received by financial markets, with Wall Street seeing significant gains, and tech stocks such as Apple and Tesla experiencing notable surges.
While the truce offers a momentary sigh of relief, investors remain cautious about the prospects of a final trade deal. The agreement, although a step back from the escalating trade war, does not resolve underlying tensions. Analysts warn that the long-term impact on the global economy remains uncertain, with policy uncertainties likely to shift to other areas, such as tax cuts and debt levels in the US.
Additionally, the pause in tariff hikes has influenced the Federal Reserve's stance, reducing immediate pressure to cut interest rates. With the economic risks temporarily eased, the central bank can afford to assess the situation further before making any moves.
Despite the positive market reaction, the truce has not fully addressed structural trade issues. Both nations have committed to further negotiations, with hopes of preventing future economic decoupling. As talks continue, businesses and investors are urged to remain vigilant, as the unpredictable nature of US-China relations could still impact global trade dynamics.
