Easing of US-China Tariffs: Markets React Positively, Experts Remain Cautious

The temporary tariff truce between the US and China has brought positive signals to global markets; however, experts warn that uncertainties and risks remain due to the absence of long-term commitments.

Phan Anh

May 14, 2025 | 23:36

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Positive Effects

According to Reuters, global financial markets responded positively following the joint announcement by the US and China to reduce tariffs on each other’s goods for a period of 90 days.

US Treasury Secretary Scott Bessent (right) and US Trade Representative Jamieson Greer at a press conference following trade negotiations with China in Geneva, Switzerland, on May 12. (Photo: Reuters)

On May 12, the US S&P 500 and Nasdaq stock indices both posted strong gains, while in Europe, the STOXX 600 index rose by 0.8%.

The US dollar appreciated, while the euro fell by 1.5%, trading at USD 1.1078 per euro. The Japanese yen also depreciated, causing the USD/JPY exchange rate to rise by 2.1% to 148.49.

The yield on 10-year US Treasury bonds rose by 8 basis points to 4.457%. Prior to the joint announcement, the yield had already climbed by 5 basis points, reflecting investor expectations of positive developments in trade relations.

Analysts believe the market's optimistic response largely stems from a sense of "relief" following weeks of volatility. John Praveen, Managing Director at Paleo Leon (New Jersey, USA), commented: “This is a relief rally as the worst-case scenario, a tariff rate above 100%, is no longer likely. (…) We've stepped back from the edge of the cliff.”

90 Days Is Not Enough for Reassurance

Despite the market's favorable reception of the announcement, many experts remain cautious due to the agreement’s vague terms and the ongoing risk of deadlocked negotiations in the future.

Expert Charles Wang, Chairman of Shenzhen Dragon Pacific Capital Management Co., described the situation as “long-term optimism mixed with 90 days of uncertainty.”

Echoing this sentiment, market analyst Jan von Gerich in Helsinki, Finland, warned, “This agreement is only a starting point; once the details are discussed, the two sides may again find themselves at odds.”

Michael Brown, a strategist at Pepperstone Group, noted: “The market’s immediate reaction to the development has been quite positive.” However, he added, “The real concern lies in the details, as the specific terms of the agreement are what truly matter.”

Arne Petimezas, Head of Research at AFS Group (Amsterdam, Netherlands), described the US decision as unexpected and unpredictable, raising the question: “No one knows whether President Trump will raise tariffs again after the 90-day pause.”

Rajeev De Mello, Global Macro Portfolio Manager at Gama Asset Management SA, argued: “The positive signals from the negotiation process are not yet convincing enough for investors to return to risk assets with confidence.”

Michael Metcalfe of State Street Global Markets (London) estimated that the average tariff rate after the agreement stands at about 15%, suggesting “we are back to square one” as both sides have merely reversed previous tariff announcements. He emphasized: “This deal does not eliminate policy uncertainty, it merely shifts it to other areas.”

Jane Foley, an expert at Rabobank, pointed out that the new agreement does not mean a return to pre-Trump era conditions. “We still do not know how these tariffs will be applied or what their impact will be on global growth or monetary policy,” she stated.

Speaking to the press on May 12, US President Donald Trump called the sharp reduction in tariffs with China achieved in the recent negotiations a “complete reset,” adding that he might hold a phone call with Chinese leaders later this weekend.

According to Reuters, Trump expressed optimism that US tariffs on Chinese goods would not revert to the 145% level after the 90-day period, and that Washington and Beijing could reach an agreement. However, he reiterated that tariffs on Beijing would significantly increase if no deal is reached.

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Phan Anh