A person walks in front of an electronic stock board showing Japan's Nikkei 225 index on Friday, Aug 2, 2024, in Tokyo. (File photo: AP/Kyodo News)

Markets rally after China and US slash tariffs for 90 days

12 May 2025, 08:13 · CNA · Join

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LONDON: Stock markets, the dollar and oil prices rallied on Monday (May 12) after Chinese and US officials slashed tit-for-tat tariffs for 90 days, fuelling hopes the two sides will pull back from a standoff that has rattled global markets.

Hong Kong's stock market closed up 3 per cent in reaction, while Paris led the way in Europe, gaining 1.4 per cent in midday deals.

The big gainer in the French capital was luxury giant LVMH, the maker of Louis Vuitton handbags, whose shares were up nearly 7 per cent.

The dollar rallied against the euro, yen and British pound, while oil prices jumped around three per cent.

"The market was not expecting the big change to US and China tariff rates, which is very positive for the outlook for the US and the global economy," said Kathleen Brooks, research director at traders XTB.

"The impact of tariffs on growth will now need to be revised lower, which is boosting the dollar ... Safe havens like gold are also seeing demand slip away," she told AFP.

Investors have been on a rollercoaster ride since US President Donald Trump unveiled eye-watering tolls on trading partners on Apr 2, with the heftiest saved for Beijing, raising concerns of a trade war between the economic superpowers.

Trump had hiked the measures against China to 145 per cent, which were met with retaliatory rates of 125 per cent.

However, after two days of highly anticipated negotiations in Geneva, the two countries hailed progress towards ending a crisis that fuelled fears of a global recession.

In a joint statement, the United States said it would reduce tolls to 30 per cent while Chinese tariffs on American goods would be cut to 10 per cent.

Investors are awaiting the release this week of data on US inflation and retail sales, which will provide a fresh snapshot of the world's biggest economy since the tariffs were first unveiled.

BETTER THAN EXPECTED: ANALYSTS

Zhang Zhiwei, chief economist at Pinpoint Asset Management in Hong Kong, said the deal was better than expected.

“I thought tariffs would be cut to somewhere around 50 per cent and this is much lower.

“Obviously, this is very positive news for economies in both countries and for the global economy, and makes investors much less concerned about the damage to global supply chains in the short term.”

But he noted that this was a three-month temporary reduction of tariffs, calling it the “beginning of a long process” to reach a final trade deal.

Kenneth Broux, senior strategist at Societe Generale in London, called the announcement on Monday a “step in the right direction”.

“The US dollar was lagging other markets in the recovery from the April lows. We had equities up back to Apr 2 levels, we had bond yields up to those levels and the dollar was actually lagging that move,” he added.

“Now the conditions are falling into place for a deeper adjustment and a bigger recovery of the dollar to catch up with equities and bond yields.”

Now that there’s “more certainty”, both China stocks and the yuan will be in an upswing for a while, said William Xin, chairman of hedge fund Spring Mountain Pu Jiang Investment Management in Shanghai.

“The result far exceeds market expectations,” he added.

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