Stocks surged on Monday following an agreement between the U.S. and China to reduce reciprocal tariffs, easing concerns about a potential economic downturn due to President Donald Trump’s trade policies. The Dow Jones Industrial Average opened 1,000 points higher, representing a 2.5% increase, while the S&P 500 and Nasdaq also saw gains of 3% and 3.9%, respectively. However, gains were partially retraced after Trump indicated continued pressure on the European Union with heightened tariffs.
Despite the initial market optimism, uncertainties persist regarding the long-term impact of tariffs. The Federal Reserve’s likelihood to maintain current interest rates through July rose significantly, reflecting concerns that inflation levels may not decrease as anticipated. The U.S. and China jointly announced reduced tariffs on imports, with U.S. duties dropping to a 30% all-in rate and Chinese levies decreasing to 10%. While this move has alleviated some economic concerns, underlying tensions and uncertainties remain.
Although U.S. stock indexes rebounded on Monday, they are still below pre-tariff levels. The reduction in tariffs, while larger than expected, does not completely resolve trade issues or erase the existing trade imbalance between the U.S. and China. Despite ongoing negotiations and positive signals, challenges persist, particularly regarding strategic industries and supply chains.
Looking ahead, Treasury Secretary Scott Bessent expressed optimism about future negotiations and the potential for progress in upcoming meetings. While uncertainties linger, both countries are expected to continue discussions with the aim of reaching a comprehensive agreement in the near future.
