Global stock markets experienced a significant uplift on 12 May 2024 after the United States and China reached a joint agreement to reduce their respective tariffs for a provisional period of three months. This development has sparked hopes of easing the trade tensions that have previously rattled the global economy.
Key Points from the Agreement
- The US will slash its tariffs on Chinese imports from 145% to 30%.
- China will reduce its tariffs on US goods from 125% to 10%.
- Both countries aim to negotiate more lasting solutions during this 90-day truce.
The announcement was welcomed by investors, leading to a rally in stock markets worldwide. Asian markets reported significant gains, with Hong Kong’s Hang Seng Index rising over 3%, and European stocks also moving higher by more than 1%.
Impacts on Global Markets
As a result of this trade agreement, oil prices surged, and the US dollar strengthened against major currencies. Financial analysts suggest that the reduced tariffs could rejuvenate supply chains and stimulate economic activity in both nations.
Mixed Reactions from Economic Experts
While the deal is seen as a positive step, economic experts caution against considering it a comprehensive solution. Zhang Zhiwei, Chief Economist at Pinpoint Asset Management, highlighted that while the agreement exceeded expectations, it’s merely the beginning of a protracted negotiation process. Kenneth Broux from Societe Generale echoed this sentiment, emphasising that this was merely a step in the right direction.
The Political Landscape
This development comes as US President Donald Trump continues to emphasise the need for fair trade practices. His administration remains under scrutiny from various groups concerned about the potential long-term impacts of the tariffs on American consumers and small businesses.
As businesses assess the implications of these temporary cuts, many are adopting a cautious approach, hoping for consistency in the evolving trade landscape.