A trade war truce between the U.S. and China had investors celebrating like Liberation Day never happened.
Driving the news: The U.S. and China agreed to a 90-day truce that will see tariffs on each other’s imports slashed starting tomorrow.
- U.S. tariffs on China will come down to 30% (a 10% base plus the 20% “fentanyl tariff”), while China will bring its retaliatory tariffs on U.S. goods down to 10%.
Why it matters: The sudden suspension of what had until now been an escalating trade fight surprised markets, which skyrocketed after the deal was announced, and suggests that — for now, at least — the Trump administration is backing down from its aggressive tariff policy.
- The truce came with no concrete concessions from China, aside from the lowering of its retaliatory tariffs. It may offer more as negotiations continue during the pause, but China seems to have successfully called Donald Trump’s bluff.
Yes, but: Although the trade war is paused, it may not be over. A full agreement could take many months to hammer out, and the U.S. could always decide to restart the trade fight if it can’t win concessions from Beijing at the negotiating table.—TS