U.S.-China Trade Truce Unveiled: A Major Milestone
Stocks on TSX and US markets surge following 90-day trade war truce agreement reached between US and China
In a game-changing development on May 12, 2025, the United States and China have hammered out a 90-day truce in their escalating trade war. The agreement brings hope for a smoother economic relationship between the world's economic titans.
The S&P/TSX composite index gained a substantial 196.94 points, surging to 25,554.68, reflecting the optimistic market sentiment. Meanwhile, U.S. indices also saw substantial gains: the Dow Jones industrial average jumped 1,026.33 points, reaching 42,275.71, while the S&P 500 index gained 143.08 points, closing at 5,802.99. The Nasdaq composite rose by 606.25 points, hitting 18,535.17.
The Canadian dollar, on the other hand, dipped slightly, trading for 71.51 cents US, compared to 71.80 cents US on the previous day.
The heart of the deal sees the U.S. suspending its 34% tariff for 90 days, but maintaining a 10% tariff during this period. In response, China will lower its tariff rate on U.S. goods to 10%, down from the previous 125%. Meanwhile, China will drop its retaliatory tariffs and non-tariff countermeasures imposed since April 4, 2025.
The culmination of U.S. and Chinese officials' meeting in Switzerland paved the way for this agreement.
This report was first published on May 12, 2025, by The Canadian Press.
Key Players: (TSX:GSPTSE, TSX:CADUSD)
The Intricacies of the U.S.-China Trade Truce
Here's a closer look at the nuts and bolts of the U.S.-China trade truce:
- Tariff Adjustments: The U.S. has agreed to lower tariffs, and China will respond with a proportionate adjustment. This could potentially level the playing field and promote a more balanced trade relationship.
- Removal of Countermeasures: Both nations will drop previously imposed tariffs and non-tariff countermeasures, a move that aims to remove a major source of trade friction.
- Continuous Dialogue: The two countries will engage in ongoing discussions to address trade issues, with senior officials from both nations participating in these talks.
The Ripple Effects of the Trade Truce
The U.S.-China trade truce has the potential to bring about several impacts, both economically and politically:
- Economic Impact: The truce could help reduce America's substantial trade deficit with China, potentially stemming the tide of offshoring jobs and boosting the manufacturing sector. More importantly, it may bring greater stability to financial markets, easing the tension between the two economic giants.
- Political Impact: The trade truce underscores the importance of maintaining a strong bilateral economic and trade relationship between the U.S. and China, impacting the global economy significantly. The successful negotiations set the stage for extending economic cooperation between the two nations in the future.
- The U.S.-China trade truce has sparked a surge in the S&P/TSX composite index, with the Canadian market showing a moderate dip in the value of the Canadian dollar against the US dollar, indicating a rebound in the overall business climate.
- The agreement between the U.S. and China, as reported by The Canadian Press on May 12, 2025, includes tariff adjustments, the removal of countermeasures, and ongoing dialogue for addressing trade issues, which could help promote a more balanced trade relationship between the two economic titans.
- Businesses in Toronto, Canada, and other financial hubs around the world may find investing opportunities arising from the U.S.-China trade truce, as the development potentially reduces trade friction and fosters economic growth in the industry, especially in areas like finance and manufacturing.
