WASHINGTON: Global stock markets surged on Monday (May 12) after the US and China agreed to slash steep tariffs for at least 90 days, tapping the brakes on a trade war between the world’s two biggest economies that had fed fears of a global recession.
But the temporary pause did little to address the underlying schisms that led to the dispute, including the US trade deficit with China and US President Donald Trump’s demand for more action from Beijing to combat the US fentanyl crisis.
While investors cheered the move, businesses were seeking more clarity.
Under the temporary truce, the US will cut extra tariffs it imposed on Chinese imports last month from 145 per cent to 30 per cent for the next three months, the two sides said, while Chinese duties on US imports will fall to 10 per cent from 125 per cent.
In addition to the tariff reductions, China agreed to lift export countermeasures issued after Apr 2, including restrictions on rare earth minerals and magnets used widely in high tech manufacturing, US trade representative Jamieson Greer said in an interview with Fox News.
Financial markets cheered the reprieve in a conflict that had brought nearly US$600 billion in two-way trade to a standstill, disrupting supply chains and triggering layoffs.
Wall Street stocks finished sharply higher, with the S&P 500 closing at its highest level since Mar 3 and the tech-heavy Nasdaq Composite recording its highest close since Feb 28.
The dollar rose, while safe-haven gold prices fell as the news eased – but did not erase – concerns that Trump’s trade war could crater the global economy.
Singapore’s Straits Times Index (STI) was up more than 1 per cent on Tuesday. It was closed on Monday due to Vesak Day, which is a public holiday.
As of 09.11am, the benchmark index was up 1.53 per cent.
Trump and his allies hailed the agreement as proof his aggressive tariff strategy was paying dividends, after the US struck preliminary pacts with Britain and now China.
“They’ve agreed to open China, fully open China, and I think it’s going to be fantastic for China, I think it’s going to be fantastic for us, and I think it’s going to be great for unification and peace,” Trump said at the White House.
It was not yet clear whether the deep trade imbalances that have hollowed out US manufacturing will be addressed.
Even US Treasury Secretary Scott Bessent, who hammered out Monday’s agreement with Chinese counterparts in weekend talks in Geneva, has acknowledged it will take years to reset Washington’s trade relationship with Beijing.
China’s state media said Beijing held firm to its principles while opening a path to more cooperation with the US, breaking from its tone of defiance a week earlier.
“Economic and trade cooperation between China and the US has a deep foundation, great potential and broad space,” government-run broadcaster CCTV said in a commentary.
Trump campaigned in the 2024 election on addressing unfair trade practices and resurrecting US manufacturing capacity. He won votes from blue-collar workers in states like Michigan and Pennsylvania that have lost manufacturing jobs for decades.
But Trump’s tariff policy also drew fire from a range of groups. Small businesses and truckers were girding for major repercussions from the China tariffs, while American consumers worried about rising costs.
Scott Kennedy, a China business and economics expert at the Washington-based Center for Strategic and International Studies, said the administration needed to pull back or risk severe damage to the US economy.
“This is 100 per cent a retreat by the US, not a Chinese cave,” Kennedy said. “The US was the one that launched the trade war and escalated it. The Chinese retaliated and they’ve only withdrawn their retaliatory measures.”
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