Markets Surge as US-China Trade Tensions Ease

U.S. stocks roared higher on Monday as investors celebrated a temporary tariff reduction agreement between the United States and China. The Dow Jones Industrial Average surged 1,160.72 points, or 2.81%, closing at 42,410.10, while the S&P 500 jumped 3.26% to 5,844.19 and the Nasdaq Composite soared 4.35% to 18,708.34. The rally followed weekend negotiations in Switzerland that resulted in a 90-day pause in escalating trade tensions, according to CNBC.

The market’s dramatic upswing represents a significant reversal from April’s volatility, when President Trump’s initial announcement of reciprocal tariffs sent stocks plummeting. With Monday’s gains, the S&P 500 has now surged more than 20% from its April lows and has nearly erased its year-to-date losses, now down just 0.6% for 2025.

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Details of the Trade Agreement

The temporary agreement reached in Geneva brings the U.S. tariff rate on Chinese imports down to 30% from the previously threatened 145%, while China also agreed to reduce duties on American goods. Treasury Secretary Scott Bessent told investors he expects negotiations to continue in the coming weeks to develop a more comprehensive trade deal, according to Bloomberg.

President Trump characterized the talks as “friendly” during a Monday press conference at the White House, stating that China has agreed to “open up” to U.S. imports and remove non-monetary barriers to trade. “They’ve agreed to open China — fully open China,” Trump said, while cautioning that tariffs could still go “substantially higher” if a full deal isn’t reached during the 90-day pause.

Chinese Vice Premier He Lifeng also spoke positively about the weekend negotiations, saying the meeting “achieved substantial progress and reached important consensus.” The two countries have agreed to establish a consultation mechanism for ongoing trade and economic issues.

Market Reaction Across Sectors

Technology stocks with significant exposure to China led Monday’s rally, with companies like Tesla and Apple experiencing substantial gains. The tech-heavy Nasdaq Composite saw the largest percentage increase among major indices, reflecting investor relief that the sector most vulnerable to trade disruptions would avoid the worst-case scenario of 145% tariffs.

Beyond equities, crude oil prices jumped more than 3% as trade tensions eased between the world’s two largest petroleum consumers. Meanwhile, defensive assets like gold and U.S. Treasury bonds fell as investors embraced risk, and the U.S. dollar posted its largest gain since November’s post-election rally.

Analysts at Wolfe Research noted the dramatic market shift, pointing out that just a month ago, when tariff concerns were at their peak, markets were experiencing the deepest oversold condition since the Covid pandemic. Now, with the S&P 500 rising about 17% from those April lows, overbought signals are beginning to flash, according to a recent market update.

Looking Ahead

While Monday’s rally suggests renewed investor confidence, significant uncertainties remain. Treasury Secretary Bessent emphasized that the current agreement is just a first step, saying, “I would imagine in the next few weeks we will be meeting again to get rolling on a more fulsome agreement.”

President Trump similarly cautioned that the path to a comprehensive deal would not be immediate, noting “it’s going to take a while to paper” the agreement with China. He also said he may speak with Chinese President Xi Jinping later this week as negotiations continue.

Market strategists suggest that while the tariff truce has alleviated immediate concerns of an all-out trade war and potential recession, investors should remain cautious as the situation develops. Jay Hatfield of Infrastructure Capital Advisors told CNBC, “We think we’ve passed peak tariff tantrum,” but noted that uncertainty remains around several issues beyond just trade, including Federal Reserve policy and potential tax changes.

As negotiations proceed through the 90-day window, market volatility could return if progress stalls or tensions reignite. However, Monday’s dramatic rally suggests investors are increasingly optimistic that the worst-case trade war scenario has been averted for now.

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