- US treasury secretary Scott Bessent says the two sides have reached a deal for a 90-day pause on more onerous measures.
- So-called reciprocal tariffs were now at 10% each.
- It means the US has reduced its 145% tariff to 30% on Chinese goods, as duties of around 20% had already been imposed by previous administrations.
- China has agreed to reduce its 125% retaliatory tariffs to 10% on US goods.
- US equities look set to surge at the open, and FTSE 100, CAC 40 and DAX are on the front foot.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’The pause button has once again been pressed on the most onerous tariffs threatening the world economy. The move by the US and China to sharply reduce tariffs has been welcomed with open arms by investors. US futures indicate a big incoming wave of optimism as the big powers demonstrate a desire for compromise. The S&P 500 looks set to open 2.8% higher as the worst-case scenario of feared tariff effects recedes. European bourses are on the front foot, but enthusiasm has been curbed by the element of uncertainty. Although the CAC 40 has risen sharply, and the DAX is up 1%, the Frankfurt based index is off earlier highs. The European Union is still in the queue when it comes to striking a trade deal. Although there are hopes that just like the UK and China, a sharp de-escalation will be achieved, it is far from conclusive.
The most immediate relief for American businesses will come from the easing of supply chain snarl ups as some flows of products have been frozen, with goods held on ships or in warehouses. Concerns about the sharply higher cost of imports are also likely to be in retreat. American retailers, which source cheaper products from China or have manufacturing bases in the country, were bracing for onerous charges and a profit squeeze. Although with the tariff pause, prices will still go up, it’s no-where near the frighteningly high levels threatened. The deal is also set to boost business and consumer confidence which should help investment and spending going forward.
Investors are showing renewed appetite for risk and are retreating from safe havens. Gold has dipped by around 3%, falling back to its lowest level in around a month amid the easing of trade tensions. However, the precious metal is still 25% higher since the start of the year, indicating that nervousness remains about the global outlook.’
