Announcing a “total reset in U.S.-China relations, President Donald Trump announced a mutual agreement to reduce tariffs with China, leading to a notable surge in global markets. This 90-day truce, resulting from negotiations in Geneva, has temporarily eased tensions between the world’s two largest economies.
Genesis of the Truce: Behind Closed Doors
The agreement emerged from confidential discussions between U.S. Treasury Secretary Scott Bessent and China’s Finance Minister Lan Fo’an during the IMF spring meetings. Subsequent talks in Geneva culminated in both nations consenting to a reciprocal reduction of tariffs by 115 percentage points for a 90-day period. President Trump characterized this as a “total reset,” signaling a potential shift in the bilateral economic relationship.
Market Response: A Temporary Reprieve
The announcement had an immediate positive impact on financial markets. The S&P 500 experienced its most significant gain since early March, with a 2.53% increase, while the Dow Jones and Nasdaq rose by 2.51% and 3.34%, respectively. Technology stocks, particularly those with strong ties to Chinese supply chains, led the rally, reflecting investor optimism about the easing of trade tensions.
Short-Term Relief, Long-Term Uncertainty
While the truce has provided short-term relief, economists caution that it does not resolve underlying issues. Goldman Sachs adjusted its U.S. recession odds to 35% and revised the 2025 GDP growth forecast from 0.5% to 1%. However, the temporary nature of the agreement and the remaining tariffs—U.S. tariffs at 40% and Chinese tariffs at 25%—suggest that significant challenges persist.
Global Repercussions: Europe’s Cautious Optimism
The European Union has expressed cautious optimism regarding the U.S.-China agreement. European Economic Commissioner Valdis Dombrovskis acknowledged the positive development but emphasized that the remaining U.S. tariffs on Chinese goods, still at 30%, continue to exert a significant trade-distorting impact. The truce offers temporary relief but does not resolve broader concerns about global trade dynamics.
A Final Note: A Fragile Detente
The 90-day tariff truce between the U.S. and China represents a momentary easing of trade tensions, with positive effects on global markets and economic forecasts. However, the underlying issues remain unresolved, and the agreement’s temporary nature underscores the fragility of this detente. As negotiations continue, the international community watches closely, aware that the path to a lasting resolution is fraught with complexity and uncertainty.
