The US-China trade war has thawed.
Treasury Secretary Scott Bessent said Monday the US and China agreed to a 90-day pause on reciprocal tariffs while baseline tariffs fall to a 10% rate.
After an escalation of reciprocal measures last month, the Trump administration had set tariffs as high as 145% on Chinese imports. China had imposed reciprocal tariffs on some US imports of as high as 125%.
Stock futures soared on the news.
Bessent touted Sunday that "substantial progress" had been made between the two countries after lengthy talks held this weekend in Geneva. Bessent teased in comments to reporters Sunday that there'd be more to say Monday morning.
As Yahoo Finance's Ben Werschkul reported Sunday, China's state-run media also set the table for Monday's landmark announcement, calling the talks constructive and saying negotiators "reached an agreement on establishing a China-U.S. economic and trade consultation mechanism" for further discussions.
Ahead of the talks, President Trump had begun opening the door to soften his stance on China tariffs, mentioning Friday that an 80% tariff "seems right." Monday's announcement suggests an agreement will see levies land well below this level.
Speaking Monday, Bessent said the US would continue moving towards balanced trade, and added the high tariffs imposed were "the equivalent of an embargo."
"We do want trade," Bessent said.
Outside of tariff news, the economic calendar this week brings investors key inflation data while Walmart features on a slowing earnings calendar.
Stocks ended last week slightly down after Federal Reserve Chair Jerome Powell reiterated the central bank's wait-and-see approach to interest rate policy and President Trump unveiled a trade deal between the US and UK.
All three major indexes finished last week in the red, as trade volatility moved stock charts. The S&P 500 (^GSPC) sank about 0.5%, while the Dow Jones Industrial Average (^DJI) slipped roughly 0.2% and the Nasdaq Composite (^IXIC) gave up about 0.3%.
Those moves looked set to reverse, and then some, Monday morning.
New inflation data coming this week will offer investors the latest look at pricing pressures.
The readings carry significance because they will be among the first bits of "hard" economic data that captures, at least in part, the time period since Trump imposed heavy tariffs on the country's trading partners. Should the data show heightened pressures, it will bolster the case that the costs of a high-tariff regime are being born by American consumers, sapping their purchasing power. Producer prices can also offer a look at inflation before those costs hit consumers, revealing where prices are heading.
Analysts surveyed by Bloomberg expect the Consumer Price Index (CPI) to increase 0.3% for the month of April compared to the prior month. In March, headline prices fell from the prior month for the first time since 2020. On a "core" basis, which strips out the more volatile costs of food and gas, prices are expected to climb 0.3% over the prior month and 2.8% compared to the same period last year.
The Federal Reserve will be watching inflation data alongside the rest of us.
Last week, policymakers at the central bank voted to keep rates where they are, citing the need for more data — and time — to understand the impacts of the tariffs, which are also still in flux.
Central bankers acknowledged that changes in trade policy have heightened risks to the US economy.
"My gut tells me that uncertainty about the path of the economy is extremely elevated, and that the downside risks have increased," Powell said during his press conference.
The Fed finds itself in a difficult position, facing the prospects of both a weakened labor market and steeper inflation that are likely to arise as a result of the tariffs.
On Friday, Federal Reserve governor Michael Barr and New York Fed president John Williams warned that that the tariffs are expected to lead to higher inflation, elevated unemployment, and slower economic growth this year.
That stagflationary cocktail is especially difficult to handle because of the tools the Fed has to maintain it. Lowering rates to boost growth and reach full employment may also invite elevated prices. Holding rates where they are, for a prolonged period of time, could help price stability but to the detriment of people's jobs.
For now the Fed is ready to wait. But Fed Chair Powell and his colleagues are aware that a tough economic scenario will require them to prioritize one or the other of its two mandates, full employment and price stability.
This week will also bring a healthy dose of Fedspeak, as at least nine Fed officials are scheduled to give talks in the days ahead, including Chair Powell, Federal Reserve Vice Chair Philip Jefferson, and Federal Reserve Governor Adriana Kugler.
Tesla is riding a wave of good fortune. Shares of the EV maker have climbed to their highest level since February as the company notched a third straight week of gains on upbeat trade developments.
As Yahoo Finance's Pras Subramanian reported, general sentiment on trade drove the latest climb as Trump floated a cut to US tariffs on Chinese imports ahead of the negotiations.
Tesla stock is up nearly 15% in the past three weeks, boosted by an earnings update highlighted by CEO Elon Musk signaling he planned to spend more time at the company as he transitions away from the Trump administration. But news for Tesla hasn't all been positive, as continued sales weakness plagued the company's European market.
For Tesla, like with Boeing last week, the prospects of a trade deal can serve as an important catalyst. Looking ahead, the dynamic negotiations placing Wall Street on a trade deal watch means investors are eager to learn what companies will be attached to potential deals or receive the benefits of relaxed tensions. Where there are trade deals, there will be trade winners.
Economic data: No notable economic data set for release.
Earnings: Fox Corporation (FOXA), Monday.com (MNDY), Chegg (CHGG), Rigetti Computing (RGTI), Plug Power (PLUG), Hertz (HTZ), Topgolf Callaway (MODG)
Economic data: Consumer price index, month-over-month, April (+0.3% expected; -0.1% previously); Consumer price index, year-over-year, April (+2.4% expected; +2.4% previously); Core consumer price index, month-over-month, April (+0.3% expected; +0.1% previously); Core consumer price index, year-over-year, April (+2.8% expected; +2.8% previously)
Earnings: JD.com (JD), Sea Limited (SE), Honda (HMC), Under Armour (UAA, UA), On Holding (ONON), Nu Holdings (NU)
Economic data: MBA Mortgage applications, week of May 9 (+11% previously)
Earnings: Sony (SONY), Tencent (TCEHY), Cisco (CSCO), CoreWeave (CRWV), Jack in the Box (JACK)
Economic data: Retail sales, April (+0% expected; +1.4% previously); Producer price index, month-over-month, April (+0.2% expected; -0.4% previously); Producer price index, year-over-year, April (+2.5% expected; +2.7% previously); Core producer price index, month-over-month, April (+0.3% expected; -0.1% previously); Core producer price index, year-over-year, April (+3.1% expected; +3.3% previously)
Earnings: Walmart (WMT), Alibaba (BABA), Deere & Company (DE), Birkenstock (BIRK), NetEase (NTES), Applied Materials (AMAT), CAVA (CAVA), Take-Two Interactive (TTWO)
Economic data: Housing starts, April (+3.1% expected; -11.4% previously); Building permits, April (-1.2% expected; +0.5% previously); Imports prices, month-over-month, April (-0.4% expected; -0.1% previously); University of Michigan consumer sentiment, May, preliminary (53.1 expected; 52.2 previously)
Earnings: Flowers Foods (FLO)
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