The United States and China have agreed on a 90-day suspension of tariffs. The U.S. will reduce tariffs on Chinese goods from 145% to 30%, while China will cut duties on American imports from 125% to 10%.

Negotiations will continue, with the U.S. aiming to avoid full economic decoupling. China will temporarily halt countermeasures, including export restrictions on rare earth materials.

Concerns Of Business Reaction

Though this truce ends a deadlock, it has no firm commitments from China on currency or trade imbalances. There is concern about whether businesses will react to the temporary relief, as costs remain elevated.

Treasury Secretary Scott Bessent noted progress in talks, with a focus on strategic decoupling in sectors like steel and semiconductors. He mentioned China’s commitment to tackle fentanyl flow into the U.S. and to prevent further tariff increases.

President Trump aims to reinstate the “Most Favored Nation” policy to reduce prescription drug costs by linking U.S. prices to the lowest-paying countries. Specifics on affected drugs remain unclear.

U.S. stocks rose significantly, with futures for the Dow, S&P, and Nasdaq indicating substantial gains. European markets also saw increases, with the German Dax reaching a new record.

Market Response And Dynamics

In the U.S. debt market, yields rose across various maturities. In other markets, crude oil increased by 4%, while silver and gold saw declines. Bitcoin’s value rose by $164, reaching $104,293.

The agreement between the two countries offers what resembles a breathing period—a limited timeframe in which escalation is, at least for now, off the table. It’s essentially a cooling-off window, not a conclusion, and while tariffs have been lowered substantially, they are far from being lifted entirely. For those of us tracking flow activity, especially in interest-rate-sensitive instruments, this shift in tone warrants close attention to capital reallocation behaviour over the next few weeks.

The absence of fixed outcomes, particularly on currency policies or smoothing trade imbalances, keeps scenarios open. This introduces uncertainty rather than dispelling it. Bessent’s remarks imply that emphasis has shifted from blanket trade disengagement to a more analysed separation in tech-heavy and resource-dependent sectors. The intention is to disentangle, albeit gradually, rather than to disconnect across the board.

This becomes relevant in part because rare earths—which underpin sectors like batteries and advanced electronics—remain an observable pressure point. China’s temporary pausing of such sanctions signals that resource leverage is still in play as a bargaining chip, though unused at present. That sort of conditional openness demands that exposure to commodities tied to critical supply chains be reassessed in terms of timing, not just volume.

The mention of non-trade items like fentanyl and pharmaceutical pricing suggests that negotiations may extend well beyond immediate industrial effects. That widens the potential range of policy influence, which in turn affects how pricing may be shaped—not directly through fundamentals, but through regulatory redirection. In derivatives linked to biotech or healthcare indices, that adds murkiness to mid-term speculation that would otherwise be modelled on earnings.

The market response, while buoyant, has had uneven texture. The jump in U.S. equities is not unusual in the wake of diplomacy that looks like conflict de-escalation. Futures surges in indexes such as the Nasdaq, however, signal more optimism around tech reprieve or delayed regulation in export exposure. On the continent, the Dax’s peak appears rooted more in global correlation than in continent-wide fundamentals, which continue to lag in manufacturing sentiment surveys.

From our view, the yield lifts across maturities points less to inflation repricing and more to shifts in sovereign risk perception and supply commitments—perverse as it may seem in a cooling-trade environment. The rate curve’s movement, when seen alongside the fall in gold and silver, implies selective reallocation away from hedges and into yield. Notably, oil’s rise may not last unless inventory data begins reflecting actual adjustment in demand-side sentiment, especially given refining tightness in Asia.

Digital assets followed the broader risk-on mood, though with limited clarity around direct implications. The small move in bitcoin shows resilience, but also a kind of wait-and-see stance by larger institutional flows. No new money seems to have arrived in force, though positioning has shifted slightly in response to short-term technical levels breaking.

For short-dated volatility, the next few weeks may see price compression as implied calm feeds into realised. However, further out on the curve—and especially within sector-specific contract structures—there’s likely to be opportunity in spreads, particularly where price recovery has overshot fundamental change. Monitoring those spreads will be more important than simply tracking direction. We aren’t looking at resolution; we’re looking at a longer holding pattern, within which misalignment can be traded.

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