This change in narrative regarding the US-China trade war has, at least for now, renewed investor confidence in the market and prompted some to take a more risk-on approach to investing in US equities. However, experts caution that euphoria, rather than fundamentals, has been driving the recent rally.
After a turbulent April, during which US tariff announcements shook global equity markets, news over the weekend of May 10 that the US and China had agreed to temporarily scale back reciprocal tariffs brought relief to US equity investors. Stocks rallied on May 12 and 13 in response.
The negotiations resulted in a reduction of tariffs from both sides — the US lowered tariffs from 145% to 30%, maintaining a 20% levy tied to its concerns about fentanyl, along with the universal tariff baseline of 10%. Similarly, China agreed to reduce its retaliatory tariffs on the US, lowering the level from 125% to 10%.
