U.S.–China Tariff Cuts Mark Diplomatic Shift and Market Repricing

The United States and China have taken a coordinated step toward cooling trade tensions, agreeing to a temporary rollback of tariffs that had threatened to drag both economies deeper into stagnation. As of May 14, 2025, Washington will reduce tariffs on Chinese imports from 145% to 30%, while Beijing has lowered its retaliatory tariffs on U.S. goods from 125% to 10%. The 90-day framework, announced following negotiations in Geneva, is being described as a sign of goodwill rather than a final settlement.

U.S. Treasury Secretary Scott Bessent labeled the move a “total reset,” though both sides have acknowledged the scope of unresolved issues. Talks are expected to continue through the summer, with a working group scheduled to formalize areas for further negotiation. While this is not the first time headline progress has emerged in the U.S.–China trade war, the sharp cut in tariffs on both sides is the clearest sign yet that both governments are attempting to reduce escalation risk heading into politically sensitive quarters.

Markets responded with broad relief. In New York, the Dow Jones Industrial Average gained more than 1,000 points on the session, while the S&P 500 and Nasdaq surged 2.9% and 4.0%, respectively. Technology and retail stocks led the rally, as investors repositioned around names with significant China exposure. Apple, Amazon, and Tesla saw some of their best one-day gains in months. Treasury yields rose on the back of stronger risk sentiment, and credit spreads tightened across most investment-grade sectors.

In currency markets, the yuan appreciated to a six-month high against the dollar, while the USD/CNH pair moved back below the 7.15 level. Traders began pricing in lower political risk premiums in Asia, with the South Korean won and Singapore dollar also showing strength. Commodity markets responded in kind, with Brent crude rising more than 4% as energy traders bet on improved global demand conditions. Copper and soybeans also advanced on expectations of resumed cross-border shipments.

Despite the upbeat tone in markets, underlying disagreements remain unresolved. Structural concerns over intellectual property enforcement, tech-sector restrictions, and capital market access have not been addressed in the current agreement. The tariff rollback is a tactical move that opens a communication channel, not a structural resolution. Still, for traders, the pivot provides a near-term realignment of risk profiles, offering fresh momentum in sectors that had been sidelined during the peak of the standoff.

With volatility expected to remain event-driven, the next few weeks will be defined by how markets interpret the credibility of this thaw and whether further concessions are likely ahead of the next G20 meeting. Until then, price action will be sensitive to official statements, media leaks, and forward guidance from both governments.

Tips for Traders

• Watch USD/CNH and CNH-crosses for continuation of yuan strength, particularly if negotiations extend beyond the initial 90-day window.

• Focus on U.S. tech and consumer names with China revenue exposure such as AAPL, AMZN, and TSLA.

• Track moves in oil and copper futures—Brent (UKOIL) and copper (XCU/USD) remain sensitive to trade optimism.

• Avoid overleveraging in case of sudden reversals; headlines still dictate momentum.

• Stay alert to any mid-period updates from U.S. or Chinese trade authorities that may shift the tone.