US and China Tariffs May-2025 Update

The Markets: Inspiring Confidence

The markets exploded with the announcement of the tariffs going lower. The Dow Jones industrial average gained 951 points, and the S&P 500 climbed 2.6 percent toward all-time highs. Investors cheered the news, with shares in a range of sectors gaining ground. (AP News)

Indeed, companies such as Tesla, Palantir and Alibaba all witnessed huge stock price jumps, despite the ongoing uncertainty in the market; clearly, investor confidence has been bolstered by the speedy rollout of vaccines in the UK, and by the scale of stimulus promised by Biden. (Investor’s Business Daily)

Economic Implication: A Reprieve For A While

Economists estimate that the temporary cease-fire could add around 0.4 percentage points to U.S. economic growth — a boost after a 0.3% drop in growth in the first three months of the year — because consumers and businesses would be less worried about tariffs and trade disputes driving up costs. Reduced trade tariffs could ease the pressures that are burdening businesses and consumers and allow economic activity to pick up. (AP News, WSJ)

Global Impact, Beyond the U.S. and China

The impact of this trade agreement reaches beyond the U.S. and China. Global markets have reacted positively, with stock indexes in Asia and Europe rising. Furthermore, there have been changes in commodity markets, oil prices rising more than 2% and gold prices falling on waning demand for safe-haven assets. (AP News, The Guardian, AP News)

Forecasting Future Challenges: Not All Clouds Have Silver Linings

Though the deal appears to be a welcome step toward de-escalation of trade tensions, it is worth noting that it is a temporary one. The 90-day period is designed to allow more time for negotiations to try to strike a broader and more lasting trade agreement. Analysts warn that the root causes have not been resolved and the potential for renewed tensions persist. (AP News, The Guardian)

Conclusion

China and the US have taken steps back from trade tensions after signing a recent trade deal, leading to a jump in global markets and renewed confidence from investors. Rather, as the 90-day period passes, attention will turn to the results of the negotiations and the likelihood of a lasting solution to the trade conflict.

FAQs

Q: What are the main provisions of the U.S.-China trade deal?

A: Each country will lower tariffs for 90 days — the U.S. cuts from 145% to 30%, and China from 125% to 10%.

Q: How did markets react to the announcement?

A: Dow Jones surged 951 points and S&P 500 rose by 2.6% following the announcement.

Q: What is the estimated impact on U.S. growth?

A: Economists project a 0.4 percentage point boost in U.S. economic growth.

Q: Is the agreement permanent?

A: No, it is a 90-day temporary arrangement meant to open space for broader negotiations.

Q: What was the global reaction to the deal?

A: Stock markets in Asia and Europe rose, oil prices climbed, and gold prices dipped.