Context:

Stocks surged as the United States and China agreed to temporarily suspend most tariffs, signaling a de-escalation in their trade war. The S&P 500 rose nearly 3%, while the Nasdaq climbed 4%, reflecting positive market reactions to the agreement to reduce tariffs for 90 days. The U.S. will cut tariffs on Chinese imports from 145% to 30%, and China will decrease its tariffs on American goods from 125% to 10%. This development strengthened the U.S. dollar and increased U.S. Treasury yields, while global indices such as Hong Kong's Hang Seng and Europe's Stoxx 600 also saw gains. Despite the market recovery, investor anxiety persists due to the unpredictability of trade policy under President Trump's administration, with potential long-term economic impacts noted by economists.

Dive Deeper:

• The U.S. and China reached an agreement to suspend most tariffs for 90 days, prompting a positive response in stock markets, with the S&P 500 and Nasdaq experiencing significant gains.

• The agreement entails the U.S. reducing tariffs on Chinese imports from 145% to 30%, while China lowers tariffs on American goods from 125% to 10%, influencing a rise in the U.S. dollar and Treasury yields.

• Global stock indices, including Hong Kong's Hang Seng and Europe's Stoxx 600, rose following the announcement, while oil prices increased by over 3%, reflecting improved economic growth expectations.

• Despite the recent market recovery, investors remain wary of trade policy volatility, as exemplified by previous sharp declines in response to sudden tariff announcements by President Trump.

• Economists caution that ongoing U.S.-China trade tensions could lead to an economic downturn, with the World Trade Organization predicting a potential 7% cut in global GDP due to economic divisions.

• The weekend talks between the U.S. and China marked the first meeting since heightened trade barriers were imposed, with officials from both sides reporting significant progress.

• This temporary relief in trade tensions is unlikely to result in tariffs exceeding 100% again, as the U.S. administration remains cautious about the economic impact of high levies.