China-US tariffs drop: 'From apocalyptic to merely bad'

SBS Australia

13-05-2025

There were cheers and fading fears on Wall Street overnight after news of a truce in the trade war between the world's two largest economies. Markets rebounded strongly after the US and China agreed to cut tariffs on each other's imports by 115 per cent for 90 days. This sent the S&P 500 surging by more than 3 per cent, while the tech-heavy Nasdaq catapulted 4.4 per cent higher. It means it's now 22.5 per cent above its low point in early April. While investors hailed the move, analysts were more cautious. "We've gone from okay to apocalyptic, to sort of merely bad." Marcus Noland is the executive vice president and director of studies for the Peterson Institute of International Economics. "When Donald Trump was inaugurated, we were 'okay.' The tariff rates were probably somewhere on the order of 15 percent to 20 percent. Then through an escalatory spiral, they rose to 145 percent. China's actually applied tariffs on us were even higher. And now they've been reduced to something on the border of 30 percent." Mr Noland says prices will still be higher, with ongoing uncertainty and delays likely to continue for some time to come. It's certainly good news for American businesses reliant on Chinese goods - but many of these have also reacted with measured relief. "It kind of feels a little bit like we dodged a hurricane, we didn't get free of the wind and the rain, but so far, we've dodged major impact.' Jay Foreman is the CEO of the toy company Basic Joy. "And our hope is, from here, is the 30 percent will maybe go down to 10 percent or less." Arthur Brunner says it's a hope shared by European investors. He's the director of market making bonds at ICF bank. ' The stock markets started the new week with a bang. The DAX set a new all-time high shortly after the opening. The reason here is the hope for a permanent, lasting agreement.' Asian markets were more mixed today, not matching the surge in the US and Europe. Economists warn that tariffs are still higher than before, and the future of talks between Beijing and Washington is far from certain. President Trump says he'll likely speak with Chinese leader Xi Jinping at the end of the week. Director-general of the World Trade Organisation, Ngozi Okonjo-Iweala is calling for a bit more chill. "It's been a challenging few years for world trade. We've seen protectionism on the rise, various measures being used by different countries. We need to be very careful that trade policy uncertainty and fragmentation do not impact the world in an adverse way. Let us not to rush to take action and counter action. So, let's keep steady. Let's keep everyone deliberate. Let's chill."