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US stocks soared on Monday as investors bet that the tariff agreement between Washington and Beijing meant Donald Trump’s trade war was moving beyond its most intense phase.
The blue-chip S&P 500 ended the day 3.3 per cent higher, while the tech-heavy Nasdaq Composite closed up 4.3 per cent. The dollar jumped 1.5 per cent against a basket of six peers, its biggest daily rise in the wake of Trump’s election on November 5.
In Asia, Japan’s Topix rose 1.4 per cent in early trading on Tuesday and the yen strengthened 0.3 per cent after a sharp sell-off on Monday.
“Peak tariffs are very much in the past,” said Ajay Rajadhyaksha, global chair of research at Barclays. “We will take a growth hit this year, but that is different from a recession.”
The US and China said on Monday that they would both cut tariffs for at least the next 90 days, following talks in Geneva at the weekend. US tariffs would be lowered to 30 per cent, while China’s would go down to 10 per cent. Both of those figures are on top of other levies that predate the 2025 trade conflict between the world’s two biggest economies.
The negotiations mark a significant de-escalation in Trump’s global tariff offensive, which had sent the blue-chip S&P 500 tumbling as much as 15 per cent following Trump’s “liberation day” announcement last month. The S&P 500 has now erased those losses, and is down just 0.6 per cent for 2025.
The Nasdaq, meanwhile, has surged 27 per cent from its intraday low on April 7 and is off only 3.1 per cent for the year to date.
Trump had paused most of the so-called reciprocal tariffs on April 9, a week after they were announced, but had left those on China, a huge source of US imports, in place. Some economists were forecasting a recession this year as a result of the levies, with higher inflation and supply chain problems upending US companies.
The US-China deal, however, is now lessening those worries. Wall Street bank Goldman Sachs on Monday said it now saw a 35 per cent chance that the US slips into a recession over the next year, from 45 per cent previously.
“Markets are defaulting to assuming we’re now in a 10-30 world: 10 per cent (tariffs) on most of the world, 30 per cent on China,” said Rajadhyaksha, who does not believe there will be significant changes to policy after the 90 days are up.
The consultancy Capital Economics calculated that because of duties that predated Trump’s return to power this year, total US tariffs on China would now come down to about 40 per cent, while Chinese tariffs on the US would be about 25 per cent.
US Treasury yields rose on Monday, indicating traders were pulling back their bets on a recession this year.
The 10-year Treasury yield, which moves with growth expectations, rose to its highest level in a month, up 0.09 percentage points to 4.46 per cent. The two-year yield, which moves with interest rate expectations, rose 0.11 percentage points to 4 per cent, as odds of big interest rate cuts from the Federal Reserve were lowered by traders.
Tech stocks and groups selling discretionary consumer goods were the biggest winners as US stocks surged on Monday. All 30 stocks on the Philadelphia Semiconductor index ended the session higher as the gauge jumped 7 per cent, while retailers Target and Home Depot climbed 4.9 per cent and 3.8 per cent, respectively.
Strategists said the S&P 500’s rally may have further to run as systematic traders — which often do well in clearly directional markets but tend to lose out during periods of volatility — gradually rebuild their positions in stocks that they had slashed after Trump’s tariff announcements on April 2.
But “stocks are not out of the woods yet”, said Deutsche Bank analysts, who highlighted that “far-reaching sectoral tariffs” on pharmaceuticals, semiconductors and copper are still expected in the coming weeks.
Priya Misra, a fixed income portfolio manager at JPMorgan Asset Management, added that “the uncertainty is still with us”.
She added: “Companies still have to think about supply chains, investment, hiring . . . some damage has been done. The dust hasn’t fully settled yet.”
