Tech stocks soared Monday after the US and China agreed to temporarily slash tariffs on each other’s goods, offering long-awaited relief to an industry battered by months of escalating trade tensions. The breakthrough has ignited investors’ optimism and signaled a possible shift in the global tech supply chain.
President Donald J. Trump announced that the US would cut its “reciprocal” tariffs on Chinese goods from 125% to 10%. China responded by reducing its retaliatory tariffs on U.S. goods from 125% to 10%. A separate 20% tariff on China, linked to accusations over the fentanyl trade, will remain in place.
“This is a total reset,” Trump said Monday, adding that the agreement is a “very good deal,” and that he may speak with Chinese President Xi Jinping by the end of the week, according to The Wall Street Journal.
Temporary relief, more talks ahead
The tariff reductions are set to last 90 days, providing a crucial window for negotiators to work toward a broader agreement. US Treasury Secretary Scott Bessent described the discussions as “very productive” and said more meetings with Beijing are expected in the coming weeks.
Bessent said, “It would be implausible for reciprocal tariffs on China to fall below 10%,” suggesting the new rates could be the new normal, at least for now.
Markets rally on news
The financial markets responded immediately and powerfully. The Dow Jones Industrial Average surged 1,136 points, or 2.7%, while the S&P 500 climbed 3%. The Nasdaq Composite, heavily weighted with tech stocks, shot up 4%, erasing most of its losses from the April market slide.
Investors cheered what many called an unexpectedly favorable outcome.
“Markets are rallying because investors are surprised with the velocity of the Chinese trade tariff deal progress,” Jeff Kilburg of KKM Financial told CNBC.
Jeff Buchbinder, chief equity strategist at LPL Financial, told CNBC, “No one had these low China tariff rates on their bingo cards. This is a big positive surprise. But this is de-escalation, not a trade deal. More work remains to be done.”
Tech and retail lead the comeback
Companies most exposed to Chinese trade posted big gains. Tesla soared almost 7%, while Apple and NVIDIA gained 6% and 5%, respectively. Dell Technologies climbed nearly 8%, while Amazon climbed over 8%. Even retailers like Best Buy saw shares rise 6% as fears of price hikes eased.
Jonathan Pingle, chief US economist at UBS, estimated that the US average tariff rate would fall from 24% to 14% following the new agreement, calling it a “cooling off” in a statement shared with ABC News.
Investors and business leaders are now watching for signs that the temporary truce could lead to a more lasting deal. For now, the pressure is off, and the markets are breathing a sigh of relief.