Markets Rally After US, China Announce 90-day Tariff Reductions

Stocks, crude oil, and Treasury yields pop on temporary tariff cuts.

Traders work on the floor of the New York Stock Exchange (NYSE) at the opening bell in New York City on May 12, 2025. Angela Weiss/AFP via Getty Images

U.S. stocks rallied on May 12 after the United States and China agreed to temporary tariff reductions.

The blue-chip Dow Jones Industrial Average soared by 1,160 points, or 2.8 percent. The index has erased most of 2025’s losses and is down by less than 1 percent.

The tech-heavy Nasdaq Composite Index is on track to exit the bear market. To kick off the trading week, it soared by nearly 780 points, or 4.35 percent. Year to date, the Nasdaq has tumbled by more than 3 percent.

The broader S&P 500 climbed by close to 200 points, or 3.3 percent, and is down by about 0.7 percent so far in 2025.

Investors cheered the world’s two largest economies temporarily lowering their tariff rates following a weekend meeting in Switzerland.

“Markets are reacting extremely positively to the news that the Trump administration was using tariffs as a negotiating tactic after all,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, said in a note emailed to The Epoch Times.

“This is a significant change for markets and should be a continuation of the healing that has happened since the April 2nd tariffs were paused for 90 days.”

The United States will lower its tariffs on Chinese imports to 30 percent from 145 percent. In exchange, the Chinese regime will cut its levies on U.S. goods to 10 percent from 125 percent.

Beijing will also remove its nontariff trade barriers, U.S. President Donald Trump confirmed to the media.

A deal has yet to be finalized.

“We have to get it papered,” Trump told reporters on May 12. “But they’ve agreed to open up China.”

In an interview with CNBC’s “Squawk Box” on May 12, Treasury Secretary Scott Bessent confirmed that he will be meeting with Chinese officials “in the next few weeks” and “avoid the upward tariff pressure.”

“We have a process now,” Bessent said. “We have a meeting mechanism. We loosely christened it the ‘Geneva Mechanism.'”

This latest development occurs days after the United States announced a trade agreement with the UK, which lowers levies on various products and boosts reciprocal market access for several industries.

Both deals spotlight that baseline universal tariffs will remain in place, according to Commerce Secretary Howard Lutnick.

“We do expect a 10 percent baseline tariff to be in place for the foreseeable future,” Lutnick said in an interview with CNN’s “State of the Union” on May 11.

“Businesses, their job is to try to sell to the American consumer, and domestically produced products are not going to have that tariff. So the foreigners are going to finally have to compete.”

Oil, Gold, and Bonds

Crude oil prices also soared because of the latest global trade developments.

West Texas Intermediate crude futures, a U.S. benchmark for oil prices, increased by 2 percent to just below $62 per barrel on the New York Mercantile Exchange.

Brent, a global metric for oil prices, also added nearly 2 percent on London’s ICE Futures exchange, flirting with $65 per barrel.

A maze of crude oil pipes and valves during a tour by the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas, on June 9, 2016. Richard Carson/Reuters

Yields on U.S. government bonds were green across the board. The benchmark 10-year Treasury yield firmed above 4.47 percent. The 20- and 30-year Treasury yields also rose, topping 4.93 percent and 4.92 percent, respectively.

Gold prices tanked by about $100, or 3 percent, to $3,240 per ounce.

Silver, gold’s sister metal, also slumped, as it fell by about 0.4 percent to below $33 per ounce.

Rest of the Week

In addition to monitoring further trade news, the financial markets will also digest a wave of economic data.

The April consumer price index report will be released on May 13. Estimates suggest that the headline annual inflation rate will be unchanged at 2.4 percent.

April’s producer price index, a precursor for pipeline inflation, will come out on May 12 and is expected to show a modest jump.

The Census Bureau will release the April retail sales data on May 12, and the consensus forecast signals a flat reading.

The week will end with the University of Michigan’s preliminary May Consumer Sentiment Index, which is expected to reveal a rebound.

“This weekend’s development is a small clearing in the middle of a forest,” Mark Malek, chief investment officer at Siebert Financial, said in a note emailed to The Epoch Times.

“The week ahead will feature important economic numbers about inflation, trade, sentiment, and inflation expectations. Please pay attention to them.”