U.S.-China deal revives markets and ‘Trump put’

Over the weekend, both the U.S. and China agreed to reciprocally slash tariffs on each other for 90 days from 125% to 10%. That’s much more than expected, as Trump on Friday has said that an 80% tariff on China “seems right!” The U.S. is still keeping its 20% fentanyl-related levy on China, so the total duty on Beijing adds up to 30%.

While high, 30% is a far cry from 145%. Investors were ecstatic, and sent stocks soaring. Technology names such as Nvidia and Broadcom, as well as consumer discretionary stocks including Nike and Starbucks, rallied. The market frenzy brought to mind the “Trump put,” the notion a falling market will prompt measures from the president that prop it up.

That said, as Dario Perkins, managing director of global macro strategy at TS Lombard pointed out, it is “(sort of) of funny that the optimistic case for Trump 2.0 is basically that it will reverse most of what it has done so far.”

A Trump put, perhaps, is just the president putting things back where they once were.

China and U.S. suspend most tariffs
The U.S. and China on Monday agreed to an initial trade deal that suspends most tariffs on imports for 90 days. “Reciprocal” tariffs between both countries will be cut from 125% to 10%, but the U.S.′ 20% duties on Chinese imports relating to fentanyl will remain, meaning total tariffs on China stand at 30%. Treasury Secretary Scott Bessent told CNBC on Monday that the deal represents progress in the country’s “decoupling” from China for “strategic necessities.”

A win for China, according to Beijing
After the U.S.-China trade deal was announced, U.S. President Donald Trump said Beijing “agreed to open up,” but offered few other details. However, Chinese officials, influencers and state-run media on Monday were casting the trade agreement with U.S. as a victory and vindication of Beijing’s negotiating strategy,  “China’s firm countermeasures and resolute stance have been highly effective,” said a social media account linked to China’s national broadcaster CCTV.

Investors cheered trade deal
News of the two superpowers’ trade deal turbocharged stocks on Monday. The S&P 500 shot up 3.26%, the Dow Jones Industrial Average climbed 2.81% and the Nasdaq Composite surged 4.35%. The pan-European Stoxx 600 index rose 1.21%. Shares of shipping giant Maersk popped 10%. U.S. Treasury yields and oil prices jumped as the chance of a recession appeared to diminish.

Technology shares rallied strongly
Members of the so-called Magnificent 7 group added an aggregate $837.5 billion in market value on Monday, the largest collective move for the group since April 9. Outside this bag of stocks and their technology peers, consumer discretionary stocks also rallied. The U.S.-China agreement resurrected the idea of the “Trump put,” in which the president will take action to prevent markets from falling too drastically.

[PRO] S&P shoots past key level
With the S&P’s rally on Monday, the broad-based index has broken through a key technical level. The speed of the movement, however, is not typical, and suggests that investors were caught off guard by trade developments — and might continue to be for the next market milestone.

Tariff pause means new surge in freight shipments, and higher prices

A surge in exports from China to the U.S. should be expected, according to retailers and logistics executives, as the initial trade deal struck by the U.S. and China leads importers to move forward with shipments during the 90-day pause on prohibitive tariffs.

“I have clients with thousands of containers pre-loaded in China that is ready to come in,” said Paul Brashier, vice president of global supply chain at ITS Logistics.

Rick Muskat, president of family-owned shoe retailer Deer Stags, tells CNBC that the 30% tariffs will allow it to resume shipments from China, but container rates will likely skyrocket due to pent-up demand.

“Our costs will go up closer to 40%,” said Muskat. “So we will have to raise prices for fall deliveries.”