Speaking in Geneva where the U.S. and China had been negotiating all weekend, U.S. Treasury Secretary Scott Bessent said the U.S. will lower tariffs on China to 30% (down from 145%), and China will lower tariffs on the U.S. to 10% (down from 125%). The reductions will last for 90 days while further trade talks continue. A separate tariff of 20% on China, intended to deter the export of fentanyl, will remain.
Although tariff rates of 10-30% are still historically high, equity investors hailed the news as a step forward. Stocks rallied instantly, and all the main indexes in Asia and Europe were up this morning.
Notably, Hong Kong’s Hang Seng rose 3% and is now up 20% year to date. China’s mainland CSI 300 index rose 1.2% and is down only 1.7% year to date. By contrast, the U.S. S&P 500 is down 3.8% since the turn of the year—an indicator that investors think the tariff war damaged U.S. companies more than it damaged Asian companies.
Here’s a snapshot of the action prior to the opening bell in New York:
Wedbush analyst Daniel Ives and his team welcomed the compromise between Washington and Beijing: “The U.S. and China today officially agreed to suspend most tariffs on each other’s goods in a ‘best case scenario’ … This is clearly just the start of a broader and more comprehensive negotiations, and we would expect both these tariff numbers to move down markedly over the coming months as deal talks progress. … in a dream scenario this morning Bessent/Chinese came out of these talks with massive cuts to reciprocal tariffs and is a huge win for the market and bulls.”
“We believe new highs for the market and tech stocks are now on the table in 2025,” he wrote in a note to clients.
Amid the exuberance, however, some sounded caution.
