Markets rally as US and China announce 115% cut to reciprocal tariffs

Markets have rebounded strongly on the back of an agreement between the US and China to sharply cut reciprocal tariffs for 90 days.

After a weekend of negotiations, the US and China will cut tariffs on most goods by 115 percentage points during a 90-day pause agreed by the two countries, effective from 14 May.

The US will reduce tariffs on most Chinese goods to 30% from 145%, while China will lower its levies on American imports to 10% from 125%.

Relief rallies

The move sparked a global market rally, particularly for energy and tech stocks.

The Dow surged more than 1,100 points to close up 2.81% at 42,410, while the S&P 500 trimmed its year-to-date losses to just 0.6% with a 3.26% gain.

The Nasdaq rose 4.35% to 18,708, posting its best day since early April.

The rally added hundreds of billions of dollars in market capitalisation to tech giants, reversing much of the damage inflicted by April’s tariff escalation, with US Treasury Secretary Scott Bessent calling the talks “very productive” and confirming that further negotiations are planned in the coming weeks.

US energy tariffs slashed

The truce between the US and China also brought some relief to commodity markets, with S&P Global reporting China would slash additional tariffs on US energy products by 91 percentage points from 14 May.

S&P further noted that news of the US-China tariff deal had lifted oil prices and was likely to revive oil and LPG trade flows.

US-China trade and goods shipments had recently plummeted due to the round of retaliatory tariffs, leading to a downgrade in GDP expansion to 3.7% and downward adjustments in oil demand growth to 78,000 barrels per day (b/d) in China for 2025.

This was down from the forecasts of 4.2% and 270,000 b/d that S&P Global Commodity Insights made in January.

Larger than expected

“The larger-than-expected tariff reductions are likely to revive some trade between the US and China, which had been completely shut by previous high tariffs,” S&P Global analyst Zhuwei Wang said.

“This development is bullish for oil prices, although it may take time for trades to fully resume.”