Wall Street Rips Higher As Tariff Truce Halts US–China Economic Escalation

The United States and China agreed to slash their retaliatory tariffs by over 100 percentage points, pausing a spiraling trade war that had threatened to choke global growth.

What's In The Deal?

The agreement establishes a 90-day reset, slashing U.S. tariffs on Chinese goods from 145% to 30%, and Chinese tariffs on U.S. goods from 125% to 10%, starting May 14.

The decision stems from high-level negotiations in Geneva, led by U.S. Treasury Secretary Scott Bessent and China's Vice Premier He Lifeng.

The truce halts one of the steepest protectionist escalations in recent history, following President Donald Trump's aggressive "Liberation Day" trade tariffs launched on April 2.

"We reached an agreement on a 90-day pause and substantially moved down the tariff levels," Bessent said in a press conference.

"Both countries represented their national interests very well, but we concluded we have shared interest in balanced trade."

Tariff Truce Cools Recession And Inflation Risks

The tariff rollback offers more than diplomatic relief — it also addresses growing fears of a U.S. economic slowdown and resurgent inflation. By averting the triple-digit import taxes that threatened to choke global trade, the deal removes a significant source of economic uncertainty that had weighed on business investment and consumer confidence.

Recession probabilities have sharply declined in response.

The latest market-based forecast from Kalshi shows a 46% chance of a U.S. recession this year, down from 60% at the end of April, reflecting improving sentiment. Notably, consumer spending and corporate earnings had begun showing early signs of strain under the tariff shock imposed in April.

On the inflation front, the agreement is expected to ease price pressures on goods most impacted by the trade war — including electronics, automotive parts and industrial equipment.

Ahead of Tuesday's official April Consumer Price Index report, economists expect a return to monthly inflation growth: headline prices are forecast to rise 0.3%, reversing March's 0.1% dip. Core inflation is also expected to rise 0.3%, while annual inflation rates are seen holding steady at 2.4% for headline and 2.8% for core.

Why Markets Cheered

U.S. equity futures soared as the news hit, with futures on the S&P 500 climbing 3.13% to 5,836.66, those on the Nasdaq 100 jumping 4.05%, and Dow futures up 2.62%.

The U.S. dollar index – as tracked by the Invesco DB USD Index Bullish Fund ETF UUP – surged 1.4%, with the greenback rallying 2% against the Japanese yen.

Meanwhile, 2-year Treasury yields rose 10 basis points to 4%, as traders dialed back expectations for a near-term Federal Reserve rate cut. The odds of a June cut fell to 11%, down from 25% a week ago, per CME FedWatch.

Gold – as tracked by the SPDR Gold Trust GLD – dropped 2.9%, with investors rotating out of safe havens, and oil climbed 3.9% to $63.40 amid improving global demand prospects.

Who Wins On Wall Street?

U.S. equities rallied sharply as investors welcomed the truce between Washington and Beijing.

Trade-sensitive and consumer-facing stocks led the premarket advance, reflecting relief over lower input costs and reduced supply chain disruption. Technology and industrials also posted notable gains.

Top Gainers – S&P 500

Top Premarket Gainers – Nasdaq 100

Top Premarket Losers – S&P 500

Read Next:

• Apple, Amazon, Nvidia Rise In Monday Premarket As US, China Agree To 90-Day Tariff Truce: ‘Neither Side Wants A Decoupling’

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