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Stocks surged Monday after the U.S. and China on Monday announced plans to temporarily slash their respective tariff rates.Key Takeaways
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Stocks were buoyant on Monday after White House officials said the U.S. and China had agreed to scale back tariffs for 90 days as negotiators work on a long-term deal.
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The reprieve exceeded Wall Street's expectations and reassured some investors that President Trump's steepest tariffs are more a negotiating tactic than a permanent policy.
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Analysts warn that the administration still has plenty of work to do, with negotiations between the U.S. and dozens of countries continuing and "Liberation Day" tariffs set to go back into effect in early July.
Christmas arrived early this year on Wall Street.
Treasury Secretary Scott Bessent on Monday said the U.S. and China agreed to slash tariffs on each other’s imports for 90 days while officials hammer out a comprehensive trade deal. The U.S. will lower duties on Chinese goods to 30% from 145%, while China will cut tariffs on U.S. imports to 10% from 125%.
The tariff reprieve exceeded the expectations of many on Wall Street. “No one had these low China tariff rates on their bingo cards,” Jeff Buchbinder, chief equity strategist at LPL Financial, said. They may not have even been on President Donald Trump’s; “80% Tariff on China seems right! Up to Scott B.,” the president said on Friday, referring to Bessent.
Stocks Soar on 'Dream Scenario'
Stocks were buoyant on Monday, with the S&P 500 rallying more than 3% to recoup all of its post-“Liberation Day” losses.
Wedbush Securities analysts led by Dan Ives called Monday’s announcement “a dream scenario” that put the possibility of stocks hitting new highs this year back on the table. They concede that some damage has been done to supply chains and the economy since Trump announced sweeping “reciprocal” tariffs on April 2, but they expect “the Street will instead focus on normalized growth” now that recession risks are dramatically lower.
Chris Zaccarelli, chief investment officer for Northlight Asset Management, interpreted Monday’s announcement as a sign that “the Trump administration was using tariffs as a negotiating tactic after all, and we aren’t going to go blindly back to the Smoot-Hawley days.”
The Trump administration has offered several justifications for tariffs. Officials have argued they will force trading partners into negotiations, raise federal revenue, and bolster American manufacturing, objectives that experts note are at odds with each other in many ways. Wall Street has been hoping tariffs will be short-lived negotiating tactics rather than permanent fixtures of U.S. trade policy.