A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., April 8, 2025. REUTERS/Brendan McDermid/File Photo
LONDON: Stocks and the US dollar surged after the United States and China said they agreed on a 90-day pause on tariffs and reciprocal duties would drop sharply, giving investors some confidence that a full-scale trade war may have been averted.
US Treasury Secretary Scott Bessent, speaking after talks with Chinese officials in Geneva, told reporters the two sides had reached the deal that was outlined in a joint statement and that reciprocal rates would drop by 115 percentage points.
The weekend’s meetings were the first face-to-face interactions between US and Chinese officials since President Donald Trump returned to power and launched a global tariff blitz, imposing particularly hefty duties on China.
Futures on the S&P 500 and Nasdaq jumped to trade up 2.8% and 3.5%, respectively, from gains of 1.5% to 2% previously, while the US dollar extended gains.
Benchmark 10-year US treasury yields rose seven basis points on the day to 4.44%, having traded up five basis points before the joint statement.
“Markets have taken it at face value, I personally am a bit sceptical, if you want to end up with low tariffs then why do it like this? It’s still bouncy, and uncertainty is elevated.
“I’m still worried that there will be a last word, that now they’ve come to an initial conclusion the details won’t satisfy both sides, and there will be something else but, of course, time will tell.
“I would not take everything we hear at the moment at face value, that’s what we saw with the ‘Liberation Day’ tariff announcement on April 2, and now it still bounces both ways,” said Jan von Gerich, chief market analyst at Nordea Bank Helsinki.
Jane Foley, head of foreign exchange strategy at Rabobank said the market reacted already overnight in anticipation of this.
“And we’ve got more details now, and it’s continuing the tone it set overnight, where it’s buying back the dollar.
“We have this scenario where the dollar is now being treated as a risky asset and is making gains.
“We’ve had reassurance from the United States that negotiations will continue and that the tone of the negotiations have been positive and the United States and China don’t want to decouple.
“So there is a lot more optimism that the tariffs won’t have the devastating impact that perhaps they could have done, and there is a collective sigh of relief in markets.”
However, Foley said that it doesn’t mean that “we’re back to where we were before the Trump inauguration, the 10% baseline tariff still exists everywhere, the 90-day pause is there and the clock is starting to tick”.
“The overall scenario is not as bad as it could have been, but we still have a fair amount of uncertainty about where these tariffs will settle, their impact on world growth and central bank policy,” she said.
Kenneth Broux, senior strategist for foreign exchange and rates at Societe Generale in London said the de-escalation between China and the United States is a clear vote by the market in favour of riskier assets.
“It’s a step in the right direction and a positive for US assets and the US economy.
“The dollar was lagging other markets in the recovery from the April lows.
“We had equities up back to April 2 levels, we had bond yields up to those levels and the dollar was actually lagging that move. — Reuters
