The United States and China have agreed to a 90-day suspension of their tariffs, with the U.S. reducing tariffs on Chinese goods from 145% to 30%, while China will cut duties on American imports from 125% to 10%.
Both sides committed to continuing negotiations, with U.S. Treasury Secretary Scott Bessent emphasizing a mutual interest in avoiding full economic decoupling. China will also suspend countermeasures, including export restrictions on rare earth materials.
Although the truce breaks a damaging impasse that halted many cross-border orders, the deal lacks concrete commitments from China on currency or trade imbalances, prompting skepticism about its long-term durability.
The question is will the suspension lead to more businesses scrambling to take advantage of the temporary tariff relief, pushing up transport costs and inflation in the process (30% is still a BIG jump in costs), or will the 30% still be a game changer (i.e., still too high).
Treas. Sec. Bessent is making the rounds and stated that the U.S. is aiming for a strategic decoupling from China in critical sectors such as steel, semiconductors, and select medicines to safeguard national interests. He noted that China now appears serious about stemming the flow of fentanyl into the U.S., and that both sides have established a mechanism to avoid further tariff escalation. Despite the decoupling goals, Bessent emphasized that the U.S. still wants American businesses to be able to sell into the Chinese market. He confirmed that significant progress was made during two days of talks and hinted that further meetings with Chinese counterparts are likely in the coming weeks, with future discussions expected to focus on non-tariff trade barriers.
Over the weekend, President Trump also announced plans to reinstate his “Most Favored Nation” policy aimed at reducing prescription drug costs by tying U.S. prices to those in the lowest-paying countries. The original rule, finalized in 2020, targeted Medicare payments for drugs administered in doctors’ offices but was blocked by courts and later revoked by President Biden. In a Truth Social post, Trump claimed the new executive order—set to be signed Monday—would cut drug prices by 30% to 80%, though specific details on which drugs or payments would be affected remain unclear.
US stocks are sharply higher on all the news, with the futures implying:
- Dow Industrial average futures implying a gain of 1026 points. On Friday the index fell -119.11 or -0.29%
- S&P index futures implying a gain of 172 109 points. On Friday the index fell -4.03 points or -0.07%.
- Nasdaq futures implying a gain of 790 points. On Friday the index was unchanged
In the European markets:
- German Dax, +0.53% (traded to a new record today)
- France’s CAC, +1.37%
- UK FTSE 100, +0.49%
- Spain’s Ibex, +0.56% (highest level since 2008)
- Italy’s FTSE MIB, +1.78% (highest level since 2007)
In the US debt market, yields are higher
- 2-year yield 3.93%, +10.0 basis points
- 5-year yield 4.090%, +10.3 basis points
- 10-year yield 4.451%, +7.6 basis points
- 30-year yield 4.81%, +4.9 basis points
In other markets:
- Crude oil up $2.50 or 4.0% to $63.54
- Silver is and $0.44 or -1.33% to $32.27
- Gold is down $108 or -3.26% to $3217.79
- Bitcoin is trading up $164 at $104,293. On Friday the price closed at $102,991.
Feed from Forexlive.com