On Monday, May 12, the United States and China issued a joint statement, agreeing to temporarily reduce tariffs for 90 days. Following this announcement, global stock markets surged, with the Dow Jones soaring over 1,000 points.
As tensions ease in the US-China trade dispute, investors have shown increased interest in risk assets. The US stock market opened higher, with the blue-chip Dow Jones Industrial Average rising by 2.5%, marking a gain of over 1000 points. The S&P 500 Index also climbed by 2.8%, while the tech-heavy Nasdaq Index surged by 4%. These three major indices reached their highest levels since April 2, March 5, and March 3, respectively.
Leading the gains were tech giants closely tied to the US-China relationship, with stocks of companies like Amazon (up 8%), Apple (up 5%), Nvidia (up 5%), and Tesla (up 6%) outperforming the market. Similarly, Alphabet (up 3%), Meta (up 6%), and Microsoft (up 1%) from the “big seven” also saw increases.
In addition, the Hong Kong Hang Seng Index surged by 3% in Monday’s trading.
US Treasury Secretary Scott Bessent stated on Monday that the negotiations with Chinese representatives over the weekend in Geneva, Switzerland were “highly productive,” with both sides agreeing to lower “equivalent” tariffs within 90 days. This means that US tariffs on Chinese goods will drop to around 30%, while Chinese tariffs on US imports will decrease to around 10%. Specific details are pending official notification.
Bessent mentioned in an interview on CNBC’s “Squawk Box” program on Monday that he expects to meet with Chinese representatives again in the “coming weeks” to reach a broader agreement.
Kurt Reiman, fixed income chief at UBS, wrote in a report on Monday, “We believe that the peak of trade uncertainties has passed, but market volatility may continue.”
Following the release of the “equivalent tariffs” statement on April 2, the S&P 500 Index nearly entered bear market territory, dropping over 20% from its record high in February. The stock market rebounded swiftly after the Trump administration reduced tariffs on other regions worldwide, but the gains were tempered as investors awaited progress in US-China trade negotiations.
Danske Bank noted in a report to clients on Monday that it now appears more likely that the US and China will ultimately approach the initial tariff baseline scenario, with US tariffs on China potentially reaching about 40%.
“While this presents headwinds for both sides, it is manageable,” the report stated, highlighting the need to monitor two key points in US-China negotiations: progress on fentanyl-related tariffs and significantly reducing the US trade deficit with China as a top priority.
Danske Bank expressed cautious optimism about a satisfactory agreement between the US and China within 90 days. “During President Trump’s first term, China failed to meet the US goods purchase level stipulated in the so-called phase one trade deal reached in 2019. Reaching an agreement that satisfies both sides’ demands within a mere 90 days will be very challenging—especially given the limited timeframe,” the report concluded.