U.S.-China Tariff Rollback Spurs Market Rally: Implications for Stocks and Cryptocurrency as of May 12, 2025

The United States and China have agreed to reduce tariffs

In a significant development aimed at easing prolonged trade tensions, the United States and China have agreed to reduce tariffs on a broad range of goods for a 90-day period. This temporary measure signals a de-escalation in the trade war that has impacted global markets over the past year.

Details of the Tariff Agreement

The agreement, announced after negotiations in Geneva, involves substantial tariff reductions: the United States will lower tariffs on selected Chinese imports from 145% to 30%, while China will reduce tariffs on American goods from 125% to 10%. These changes are effective immediately and will be reassessed after the 90-day period.

Additionally, both nations have established a bilateral economic and trade consultation mechanism to facilitate ongoing dialogue and cooperation.

Impact on Stock Markets

The announcement has had an immediate positive effect on global stock markets. U.S. equity futures surged, with the S&P 500 futures gaining 2.8% and the Dow Jones Industrial Average recovering from recent losses. European markets followed suit, with Germany’s DAX index reaching new record highs. Asian indices, particularly the Hang Seng and Nikkei, also posted gains.

Sectoral Reactions

• Technology: Companies heavily reliant on Chinese supply chains, such as Apple and Nvidia, saw significant stock price increases.

• Industrial and Manufacturing: Firms in these sectors benefited from reduced costs of raw materials and components.

• Retail: Import-heavy retailers like Walmart and Target experienced stock gains due to anticipated lower product costs.Crypto Basic+3CoinDesk+3TradingView+3

Investor Sentiment

Institutional investors have expressed cautious optimism. Goldman Sachs reports that the probability of a prolonged trade war has decreased from 70% to 45%, leading portfolio managers to reallocate assets towards risk-on positions in anticipation of a short-term rally.

Cryptocurrency Market Response

The cryptocurrency market has also reacted positively to the tariff developments.

Bitcoin (BTC)

Bitcoin's price has surpassed $104,000, nearing its all-time high. Analysts attribute this surge to the easing of U.S.-China trade tensions and increased institutional investment. Some forecasts suggest that Bitcoin could reach $150,000 if current trends continue.The Crypto Times

Ethereum (ETH)

Ethereum has experienced a significant rally, with its price increasing by 42% over the past five days, reaching approximately $2,551. This surge follows the successful launch of Ethereum's Pectra upgrade on its mainnet, enhancing network scalability and efficiency.TradingView+1Wikipedia+1

Altcoins and DeFi

The decentralized finance (DeFi) sector has benefited from renewed investor interest, as lower macroeconomic risk often leads to greater speculative appetite. Tokens like Solana, Chainlink, and Aave have posted gains between 4% and 8%.

Long-Term Economic and Geopolitical Implications

While the 90-day tariff reduction is temporary, its implications are far-reaching:

• Strengthened Diplomatic Ties: The agreement suggests a willingness from both Washington and Beijing to move away from economic brinkmanship, potentially setting the stage for a more durable trade agreement.

• Inflation Control: High tariffs had contributed to inflationary pressures by increasing the cost of goods and raw materials. The rollback is expected to ease these pressures slightly, aiding central banks in maintaining accommodative monetary policies.

• Global Trade Rebalancing: As tariffs ease, global supply chains could begin to normalize, particularly in tech and manufacturing sectors, benefiting multinational corporations and emerging markets tied to Chinese and American economies.

• Risks Remain: Despite the optimism, significant risks persist. The 90-day window is short, and failure to make substantial progress could lead to renewed escalation. Structural disagreements—such as those over intellectual property and technology transfer—remain unresolved.

The U.S.-China tariff rollback represents a significant step toward resolving trade tensions that have impacted global markets. While the immediate effects are positive, the long-term outcome will depend on the success of ongoing negotiations and the establishment of a more stable and cooperative economic relationship between the two nations.

Investors in both traditional and cryptocurrency markets should remain vigilant, as geopolitical developments continue to play a crucial role in market performance.