On Friday, President Trump announced that he had reached an agreement with Chinese leaders regarding tariffs, a welcomed occurrence to happen this soon after each country saddled the other with horrendous fees. China seemed less enthusiastic, referring to it as a “consensus” instead. Regardless of terminology, many manufacturers and stockholders breathed a sigh of relief. China says it will release a joint statement with the U.S. Monday on what was achieved.

Although no details were immediately made available, everything seemed positive. In a media briefing after a second day of talks with U.S. negotiators on Sunday, Chinese Vice Premier He Lifeng said trade talks with the U.S. “achieved substantial progress and reached important consensus.” “The two sides agreed on establishing a consultation mechanism for trade and economic issues, identify the lead persons on each side, and will carry on further consultations relating to trade and economic activity.”

While U.S. Trade Representative Jamieson Greer called it a “deal,” Treasury Secretary Scott Bessent, who was in Switzerland for the talks with Greer, was more reserved saying only that "substantial progress" had been made. On Monday, the announcement was made including terms set for a 90-day period, with negotiations to continue meanwhile.

Pre-agreement, President Trump had showed his willingness to ease tariffs on China saying on social media it "seems right" to slash levies from 145% to 80%. This was in stark contrast to his actions last month whereby tariffs were raised sharply on China, prompting China to retaliate with 125% tariffs on U.S. goods. The tit-for-tat measures set off a trade war with America’s third-largest trade partner, responsible for nearly $440 billion worth of imports last year.

Vice Premier He Lifeng offered that China has been “clear and consistent” in their stance and they were never seeking to engage in a trade war. Just such was avoided via Monday’s announcement of the agreement to instigate a 90-day pause on the tariffs aimed at each other. Wall Street was expected to respond favorable and they did. More on that later. Much of the globe showed relief also, deterring concerns about the effects a trade war between the world’s two largest economies would have upon global markets.

The combined US tariff rate charged on imports from China will be cut to 30% from 145%, while China’s retaliatory tariffs on US imports will fall to 10% from $125%. Substantial changes indeed, and ones that hopefully will remain long after the agreed upon 90 days provided for in the agreement. Tariff reductions were bigger than expected and Bessent says ‘neither side wants to decouple’.

The new 30% rate is the sum of the 20% duty Trump imposed earlier this year over China’s failure to curb fentanyl flow into the US and the 10% universal tariff he has applied o almost all foreign imports.

Markets reacted immediately upon news of the agreement. The S&P 500 was already trading 3.1% higher by Monday afternoon. The Dow Jones Industrial Average added over 1100 points, a nearly 3% gain. The Nasdaq, which is more tech-focused, rose also, by more than a full 4%.

Regarding international markets, the European indexes moved ahead modestly. Asian markets were positive as well, celebrating the agreement and looking positively towards a long-term solution. The ceasefire between India and Pakistan also help influence Asian markets in a positive manner. Hong Kong’s Hang Seng Index also rose significantly with the news, closing more than 3% higher.

Following the announcement, oil prices rose to a two-week high. This increase was attributed to the news raising hopes for an end to the trade war between the world’s two largest economies. The agreement, which temporarily lowered tariffs, had a positive impact on the market, leading to a rally in oil prices.

Brent crude futures rose by $1.05, or 1.6%, to settle at $64.96 a barrel. It seems the market reacted favorably to the news of the trade truce. Why? Oil prices are affected greatly by both geopolitical risk and global economic conditions. The agreement eased market jitters and boosted investor confidence. The result? A meaningful rise in oil prices.

“The two sides agreed on establishing a consultation mechanism for trade and economic issues, identify the lead persons on each side, and will carry on further consultations relating to trade and economic issues of their respective concerns,” the Chinese vice premier said.

"China does not want a trade war", he said, adding that China’s stance has been “clear and consistent,”. They seemed genuinely happy with the agreement and sounded positive about reaching a more permanent agreement in the near future.

Chinese officials called the meeting “productive” and said that “an important first step [was] taken by the two sides to properly resolve their differences through equal-footed dialogue.” Regarding the atmosphere of the meetings Chinese trade negotiator Li Chenggang characterized them as having “mutual respect and sincerity”.

“China is always pursuing win-win outcomes in its trade and economic negotiations…deemed to be in the interest of China,” he said.

Some analysts were less optimistic, urging caution, while reminding us that tariffs remain far higher than before Trump took office. Price hikes for some consumer good will inevitably happen. Groceries, cars, and, ironically, fireworks, were mentioned as items specifically subject to such. New federal data regarding inflation comes out the very day after Monday’s announcement.

Shipping volumes from China had been falling sharply since early April. Tariff impacts are already being felt across the country. Danish shipping giant A.P. Moller-Maersk added Monday that the agreement was “a step in the right direction” and that it could “create the long-term predictability our customers need.”

The agreement was generally accepted as being good news for small and medium sized businesses “on both sides of the Pacific”, said Tianchen Xu, a Beijing=based economist. It should be “a very big relief for struggling small Chinese exporters, some of which have already lost US orders for weeks”. Meanwhile, American buyers are gaining some breathing room over rising costs.

According to Yale researchers, the US’s effective tariff rate would now be 17.8%, the highest since 1934. They predict households’ annual purchasing power to drop by $2,800 or more.

The fact that the United States has a larger goods trade deficit with China than with any other country has led Trump to accuse it of using unfair trade practices to “rip-off” the US. Unlike other US trading partners, Beijing was the only notable trade partner to respond by imposing retaliatory tariffs and other countermeasures that resulted in the recent showdown.
Bessent called the dueling import taxes “the equivalent of an embargo,” and reminded us that neither side wanted such. “We do want trade, we want more balanced trade, and I think that both sides are committed to achieving that,” he said.

Bessent, who represented the US in the talks with Beijing along with Trade Representative Jamieson Greer, reminded us that “business as usual” would not have been effective in an effort to rebalance trade. Analysts, however, maintain that negotiating immediately would have been more productive than triggering a tariff war and potentially causing further global turmoil.

Of note, Greer noted that separate discussion on fentanyl were “on a very positive track”

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It is hoped that the US will build on the foundation of this meeting, continue to work in the same direction with China” and “completely correct its unilateral tariff practices, a Chinese spokesperson said.

The agreement exceeded many’s expectations and has “rekindled global hope,” said Wang Wen, Dean of the Chongyang Institute for Financial Studies at Renmin University of Chine. But Xu and Wang both cautioned that many difficult issues remain unresolved.

“This situation is a major test of the political wisdom and negotiation capability of the decision-makers in both China and the U.S.,” Wang said.

The Chinese Commerce Ministry said the agreement was an “important step” and “creates favorable conditions for further narrowing differences and deepening cooperation.”

Stay tuned. It will be interesting to see what the next 90 days will hold. It seems both sides are committed to reaching a more permanent agreement and their positive tones regarding negotiations seems to make such more likely. As for myself, I believe when everything is said and done, that world trade will have been significantly changed and that America will be in a better trading position not only with China, but across the globe.