Tech stocks are leading the rally
The Dow Jones Industrial Average opened up around 1,000 points on Monday while the S&P 500 surged 150 points and the Nasdaq jumped nearly 700 points after an agreement was reached in the U.S.-China trade war.
U.S. officials, led by Treasury Secretary Scott Bessent, met with their Chinese counterparts in Davos, Switzerland, over the weekend and carved out a 90-day tariff pause and pulled back drastically on tariffs.
China agreed to remove the 125% retaliatory tariffs it announced on the United States since April 4, as well as its initial 34% tariffs on the U.S. It will only retain a 10% tariff during the 90-day pause.
Likewise, the U.S. will suspend its 125% reciprocal tariffs on Chinese imports. However, the U.S. will retain its 20% tariff imposed in February to stop the flow of fentanyl, and its 10% baseline tariff, during the pause. So, overall, the tariffs on China will go from 145% to now 30%.
Further, the two nations agreed to establish a mechanism to continue discussions about trade and economics during the 90-day pause. China will be represented by He Lifeng, vice premier of the State Council, while the U.S. will be represented by Bessent and Jamieson Greer, United States Trade Representative.
“We have reached an agreement on a 90 day pause and substantially moved down the tariff levels,” Bessent said at a press conference Sunday. “Both sides on the reciprocal tariffs will move their tariffs down 115%. We had very robust discussions, both sides showed great respect.” Overall, he called it a “very positive process.”
Tech stocks soar
Technology stocks gained the highest lift from the cooling of trade tensions between the U.S. and China. The Nasdaq Composite opened about 680 points higher, rising 3.8% in early trading.
Dan Ives, analyst at Wedbush, called the result a “best-case scenario” from the weekend talks, in a research note. Ives also called it a “huge win for the market and bulls … We believe new highs for the market and tech stocks are now on the table in 2025.”
The Dow Jones Industrial Average jumped about 985 points at the open, or 2.3%, while the S&P 500 soared 150 points, or 2.6%. Small-caps sputtered, however, as the Russell 2000 dropped about 3 points.
NVIDIA stock jumped about 4% at the opening bell. Meanwhile, Amazon, which has considerable exposure to Chinese tariffs, rose 7% and Apple, also subject to significant Chinese tariffs, climbed 4.6%.
What comes next?
While the 90-day pause is a major step towards easing tensions, John Murillo, chief dealing officer at B2Broker, a global fintech solutions provider for financial institutions, said it does not guarantee a complete resolution of the trade war.
“Once those 90 days are up, everyone will be keeping a close eye on what happens next, especially the results of ongoing negotiations and whether the tariffs will be permanently cut or brought back,” Murillo said. “There’s undoubtedly an issue of the U.S. goods’ competitive pricing and Chinese customers’ propensity to consume them in bulk volumes, which have not been studied and addressed yet to call it quits.”
Also, economic indicators will further address how the talks unfold, Murillo added.
“If the tariffs are permanently lowered, we could see a further boost in trade and investment, which might spark economic growth,” Murillo said. “On the flip side, if they come back or if negotiations fall through, we could face market volatility and a downturn in economic indicator.”
