Key Points
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The stock market is rallying on news of the United States and China agreeing to a tariff pause.
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Chinese tariffs on the U.S. have been lowered to 10%. The U.S. lowered tariffs on China to 30%.
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This is still a pause and is considered to be temporary, but the market is optimistic.
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The U.S. and China have both agreed to mutually pause tariffs after talks in Geneva. The triple-digit tariffs that both China and the U.S. had on each other amounted to an effective trade embargo, and this was mainly why the stock market has been bearish. Companies were running out of inventory, and many had braced for empty shelves this month.
But both countries have now agreed to temporarily reduce these tariffs. U.S. tariffs on China will decrease from 145% to 30%, and Chinese tariffs on U.S. imports will drop from 125% to 10% starting Wednesday, May 14, 2025. In response, the stock market is rallying.
Here’s a market update as of 10:00 AM (ET) today.
- The S&P 500 is up 144.61 points, or 2.56%.
- The Nasdaq Composite is up 620.22 points, or 3.45%.
- The Dow Jones Industrial Average is up 1,007.22 points, or 2.44%.
Tariffs Paused on China
In essence, both countries have a 10% base tariff rate on each other, but the 30% U.S. tariff rate on China is due to the 20% “fentanyl tariffs” that were imposed by the Trump administration earlier this year. These tariffs are expected to remain in place, and Treasury Secretary Scott Bessent called the current level of tariffs on China a “floor”.
And while tariffs are now significantly lower and the market appears much more bullish, this is not a fix. 30% tariffs on China will still cause an increase in prices that everyday consumers will feel. But instead of a triple-digit tariff rate that basically eliminated trade, 30% is something that is painful, but not completely unacceptable. Companies could still hold off on imports, as many expect tariffs to drop further with trade talks taking place.
You should still remember that the de minimis exemption suspension remains in place, and so do the fees on Chinese vessels docking at U.S. ports. Other existing steel, aluminum, and tech tariffs also remain unchanged.
Bessent’s Comments
The Treasury Secretary made the following notable comments:
- “We think there is a possibility of purchase agreements to bring bilateral trade deficit into balance.”
- “We would like to see China more open to U.S. goods.”
- “We do not want a generalized decoupling from China,”
- “But what we do want is a decoupling for strategic necessities, which we were unable to obtain during Covid and we realized that efficient supply chains were not resilient supply chains.”
- “It’s implausible tariffs on China go below 10%”.
- “Can always go back to April 2nd level for China tariffs.”
- “I could see a Trump-Xi call happening in coming weeks or months”.
- “If China acts, perhaps the fentanyl tariff could come down”.
Comments From Trump
President Donald Trump has signed an executive order to dramatically lower prescription drug costs. As such, pharma stocks have been down.
He also made the following notable comments today:
- “China agreement doesn’t include pharma.
- “Agreement doesn’t cover tariffs on cars, steel, aluminum or pharmaceuticals.”
- “I spoke to Tim Cook this morning. He will build a lot in the US.”
- “I will speak to China’s President Xi at the end of the week, maybe.”
- “The best part of the deal is China agreeing to open up.”
- “We achieved a total reset with China.”
Other Assets
- Gold is down 2.8% to $3,249.
- Crude Oil Futures are up 3.28%.
- Natural Gas Futures are down 4.1%.
- Bitcoin is up 0.24% to $104,293.
The image featured at the top of this post is ©Openverse.