Stocks soared on US-China trade war ceasefire; Gold slips

·       Oil surged on fading concern of synchronized Trumpcession after US-China temporary trade truce and Trump’s secondary sanction of Iranian oil  

·       Gold edged up on softer inflation

On early Friday, May 9, 20215, Wall Street Futures briefly slipped after Trump suggested 80% tariffs on China ahead of formal trade talks between the US and China. The market was expecting 40% (with Fentanyl tariffs of 20%). Trump truthed:

·       80% Tariff on China seems right! Up to Scott Bessent.

·       CHINA SHOULD OPEN ITS MARKET TO THE USA — WOULD BE SO GOOD FOR THEM!!! CLOSED MARKETS DON’T WORK ANYMORE!!!

On the weekend, the focus of the market was on the formal US-China trade negotiation meeting in Geneva. On May 10, the US and China agreed to a 90-day temporary trade truce, effective May 14, 2025, following negotiations in Geneva. U.S. tariffs on Chinese goods were reduced from 145% to 30% (base tariff 10% + Fentanyl punishment levy/tariff 20%), and China lowered its tariffs on U.S. goods from 125% to 10%. This followed a period of escalating tariffs, with Trump imposing 145% duties on Chinese imports in April 2025, prompting Beijing’s retaliatory measures. The truce aims to de-escalate tensions and facilitate ongoing trade talks to address the U.S.’s $295 billion trade deficit with China and promote balanced trade.

U.S. Tariffs on Chinese Goods were reduced to 30% (including a 20% Fentanyl levy)  on Chinese imports as part of the truce, down from 145% imposed in April 2025. The 30% tariff applies broadly to Chinese goods, but President Trump stated that tariffs on specific sectors—cars, steel, aluminum, and potentially pharmaceuticals—are not covered by the truce and may remain at higher rates or under separate so-called national security policies. Specific goods or categories exempted from the 30% rate are unclear, as no detailed breakdown was provided. The 145% tariff was a blanket duty and was an embargo on Chinese imports, escalating trade tensions. The reduction aims to de-escalate and facilitate negotiations to address the U.S.’s $295 billion trade deficit with China (as per Trump’s narrative).

Chinese Tariffs on U.S. Goods were also lowered to 10%, down from 125% imposed in retaliation for 125% U.S. tariffs +20% Fentanyl levy. The 10% tariff applies broadly to U.S. exports to China, though specific products or sectors affected are not fully detailed. China also committed to reducing non-tariff barriers, such as import restrictions and blacklisting of U.S. firms, as part of the truce. The 125% tariff was a retaliatory measure targeting U.S. goods, particularly impacting agricultural and industrial exports. The reduction signals China’s willingness to negotiate but does not eliminate trade barriers, at least initially. Like the U.S., China has not publicly specified which U.S. goods are subject to the 10% rate or if certain products (e.g., agricultural goods or technology) face different treatment.

The U.S. aims to address its $295 billion trade deficit with China, with the truce seen as a step toward balanced trade. Both sides expressed a desire to avoid a full trade “decoupling.” China’s commitment to reducing non-tariff barriers (e.g., regulatory restrictions, blacklisting) is a key concession, though implementation details are pending. The truce is temporary (90 days), and unresolved issues, such as China’s mercantilist policies and U.S. concerns over national security, could lead to renewed tensions if negotiations stall.

Specific tariff schedules and exemptions remain vague, pending further clarification from U.S. and Chinese trade authorities. No comprehensive list of affected goods or sector-specific tariff rates is available from the provided information. The exclusion of cars, steel, aluminum, and pharmaceuticals from the U.S. tariff reduction suggests targeted high tariffs persist, but exact rates for these sectors are unspecified.

President Trump hailed the Geneva talks as a “total reset” in U.S.-China trade relations, describing them as “friendly but constructive” and emphasizing progress toward opening China to American businesses. He suggested an 80% tariff rate “seems right” before the talks and expressed optimism about a permanent deal, noting he expected to speak with Chinese President Xi Jinping soon. Trump also claimed the truce does not cover tariffs on cars, steel, aluminum, or pharmaceuticals.

Bessent’s Comments

Treasury Secretary Scott Bessent, who led the U.S. delegation alongside the USTR Greer, described the talks as “productive and constructive,” reporting “substantial progress.” He emphasized that neither side wants a trade “decoupling” and called the high tariffs “the equivalent of an embargo.” Bessent stressed the goal of balanced trade and noted China’s commitment to reducing non-tariff barriers, such as import restrictions and blacklisting of U.S. firms. He also highlighted the positive role of the Swiss venue in fostering productive discussions. Under the temporary pause unveiled on Monday, the combined US levies will be reduced to 30%, while the 125% Chinese duties on American goods will drop to 10%. Bessent said that neither nation wants to “decouple,” and that talks might lead to “purchasing agreements” by China.

USTR (Greer’s) Comments

U.S. Trade Representative Greer described the talks as “constructive,” suggesting a deal was reached that addressed U.S. national security concerns regarding China’s trade practices. He noted the agreement was reached quickly, indicating smaller-than-expected differences, and affirmed both sides’ commitment to continued negotiations. Greer did not provide specifics on tariff reductions but emphasized the goal of rebalancing trade relations.

As per the latest White House press release-U.S. Tariffs on Chinese Goods

Current Tariff Rate: Effective May 14, 2025, at 12:01 a.m. EDT, the U.S. imposes an additional 10% ad valorem duty on all articles imported from China (including Hong Kong and Macau), suspending 24 percentage points of the previous rate for 90 days.

Previous Tariff Rate: Before the truce, Chinese imports faced a 145% tariff, which included:

·       A 125% reciprocal tariff in response to China’s retaliatory measures.

·       A 20% tariff to address the fentanyl crisis.

·       Section 301 tariffs on specific goods, ranging from 7.5% to 100%.

Exceptions include goods like semiconductors, steel, aluminum, autos/auto parts, copper, pharmaceuticals, lumber, bullion, and certain minerals, which may be subject to other tariffs (e.g., Section 232 or Section 301 duties).

Specific Duties: For low-value imports (under $800) via the international postal system, a $200 per postal item duty applies for goods entered on or after June 1, 2025, as per prior modifications.

Exclusions: Semiconductors, defined broadly under HTSUS Chapters 84 and 85 (including smartphones, storage devices, and display modules), are exempt from reciprocal tariffs, with refunds for duties collected since April 5, 2025.

Chinese Tariffs on U.S. Goods

Current Tariff Rate: China has reduced its tariffs on U.S. goods to an additional 10% ad valorem duty for 90 days, suspending 24 percentage points of its previous rate, as per the Geneva agreement.

Previous Tariff Rate: China had imposed a 125% tariff on U.S. goods, retaliating against U.S. actions:

·       Initially, a 34% tariff was announced on April 10, 2025, in response to U.S. Executive Order 14257.

·       This escalated to an 84% tariff after U.S. tariff increases via Executive Order 14259.

The 10% tariff applies broadly to U.S. goods, but specific products or exemptions are not detailed in available sources.

Fentanyl Crisis: The agreement includes commitments to address the flow of fentanyl precursors from China, though specific actions are not detailed.

Summary of Trump’s Comments:

·       We are going to slash the cost of prescription drugs, and we will bring fairness to America. Drug prices will come down—We're gonna cut out the middlemen and facilitate the direct sale of drugs at the most favored national price directly to the American citizen!

·       Edan Alexander is to be released by Hamas. Great news

·       Drug prices to be cut by 59%

·       Gasoline, energy, groceries, and all other costs, down

·       DRUG PRICES TO BE CUT BY 59%, PLUS! Gasoline, Energy, Groceries, and all other costs are DOWN. NO INFLATION!!! LOVE, DJT

·       EDAN ALEXANDER, AMERICAN HOSTAGE THOUGHT DEAD, TO BE RELEASED BY HAMAS. GREAT NEWS!

·       The US is ready to help India and Pakistan with trade

·       Trade is a big reason they stopped fighting

·       We achieved a total reset with China

·       Trump on China agreement: The agreement doesn't cover tariffs on cars, steel, aluminum, or pharmaceuticals

·       The China agreement doesn't include pharma

·       I spoke to Tim Cook this morning. He will build a lot in the US

·       I will speak to China’s President Xi at the end of the week, maybe.

·       The best part of the deal is China agreeing to open up

·       Opening up China will take a while to paper over

·       We achieved a total reset with China

·       China has agreed to stop fentanyl

·       There's a big incentive for China to stop. Take China at their word

·       China will be rewarded with tariffs for fentanyl action

·       I will no longer tolerate profiteering from big pharma

·       The EU was the most difficult on drug subsidies

·       We will slash the cost of prescription drug prices--Could come down from 59 to 80 to 90%

·       Drug prices to go down by as much as 90% for some, or more

·       The EU is nastier than China. The EU will come down a lot

·       The EU will have to pay more for healthcare

·       We will secure the most favorable drug pricing

·       Trump threatens to target cars if drug prices don't go down

·       We will cut out middlemen in drug sales

·       We will help drug companies in other nations

·       We will do whatever we have to with trade

·       We will add on to tariffs if nations don't abide by the drug policy

·       If necessary, we'll investigate the drug companies

·       China will 'open up' to U.S. businesses, suspend trade barriers

·       Many other deals are coming in

·       Very good things are happening in Iran. Iran is acting intelligently

·       Iran is very reasonable

·       I was thinking about flying over for the Ukraine meeting; there's a possibility if I think things will happen.

·       China tariffs will go up without a deal

·       China tariffs won't go back up to 145%

·       I think we'll have a deal

·       I'm not talking about changing tariffs on cars and steel

·       The tax bill seeks a deduction on auto loans if the car is made in the US

·       I believe Russia will agree to a 30-day ceasefire

·       I think China will follow through on non-monetary barriers

·       Trump signs order aiming to cut some U.S. drug prices to match lower ones abroad

·       Trump says he talked to Apple CEO Tim Cook after China tariff rollback

·       Trump to offer Iran a path to a brighter future

·       In Syria, we must all hope a new government will succeed

·       Trump calls the China agreement a breakthrough

·       China has agreed to open up to the US for trade. China has to do it, we'll see what happens.

·       I had great meetings with the UK and China.

·       We're in good shape to pass the tax bill, and Congress is on the verge of passing the biggest tax cut in history.

·       The tax bill would be a rocket ship for the US economy

·       Now we're tariffing them at a level nobody's seen

·       Tariffs are making the US a different country, and a different party

·       We're tariffing countries that tariffed us

·       I am adding $1 trillion of investment into the US with the Saudi trip

·       There will be deals with Amazon, Oracle, and others

·       Multibillion-dollar deals with Amazon and Oracle are all here

·       Companies weren't happy with me a month ago, but it's amazing what a rising market will do

·       There will be a redistribution of costs to other countries

·       The market will go higher. It's gonna go a lot higher

·       There are commercial deals also with Uber, J&J, and others

·       We don't want to be bombing each other out of existence

·       I hope Saudi Arabia will join the Abraham Accords

·       We're working with the region, and the task is to unify against chaos.

·       The most destructive is the Iranian regime

·       The Arab states are focused on stability, and Iran on terror

·       Iran has dragged an entire region down with it

·       The differences with Iran are profound

·       I never believed in having permanent enemies

·       I am willing to end past conflicts

·       I want to make a deal with Iran

·       If Iran rejects the olive branch, we will have no choice but to inflict maximum pressure.

·       Iran will never have a nuclear weapon

·       We would drive Iranian oil exports to zero

·       The Iran offer will not last forever

·       Things are happening at a fast pace

·       The time is right now for Iran to choose

·       Trump tells Iran: Make your move

·       Ukraine talks could produce good results, we'll see if we can get it done

·       We stopped Iran's oil with an embargo and sanctions

·       We believe in peace through strength

·       We won't hesitate to wield American power if necessary. No mercy for any foe who tries to do us harm

·       We have things you don't even know about

·       Working hard to end the Russia/Ukraine bloodshed

·       .S. will remove all sanctions on Syria

Trump’s Truths on Pharma Pricing Policy:

“For many years the World has wondered why Prescription Drugs and Pharmaceuticals in the United States States of America were SO MUCH HIGHER IN PRICE THAN THEY WERE IN ANY OTHER NATION, SOMETIMES BEING FIVE TO TEN TIMES MORE EXPENSIVE THAN THE SAME DRUG, MANUFACTURED IN THE EXACT SAME LABORATORY OR PLANT, BY THE SAME COMPANY??? It was always difficult to explain and very embarrassing because there was no correct answer. The Pharmaceutical/Drug Companies would say, for years, that it was Research and Development Costs, and that all of these costs were, and would be, for no reason whatsoever, borne by the “suckers” of America, ALONE. Campaign Contributions can do wonders, but not with me, and not with the Republican Party. We are going to do the right thing, something that the Democrats have fought for many years. Therefore, I am pleased to announce that Tomorrow morning, in the White House, at 9:00 A.M., I will be signing one of the most consequential Executive Orders in our Country’s history. Prescription Drug and Pharmaceutical prices will be REDUCED, almost immediately, by 30% to 80%. They will rise throughout the World to equalize and, for the first time in many years, bring FAIRNESS TO AMERICA! I will be instituting a MOST FAVORED NATION’S POLICY whereby the United States will pay the same price as the Nation that pays the lowest price anywhere in the World. Our Country will finally be treated fairly, and our citizens' Healthcare Costs will be reduced by numbers never even thought of before. Additionally, on top of everything else, the United States will save TRILLIONS OF DOLLARS. Thank you for your attention to this matter. MAKE AMERICA GREAT AGAIN!”

Trump’s Truths on Powell and rate cuts after US inflation data:

“No Inflation, and Prices of Gasoline, Energy, Groceries, and practically everything else, are DOWN!!! THE FED must lower the RATE, like Europe and China have done. What is wrong with Too Late, Powell? Not fair to America, which is ready to blossom? Just let it all happen, it will be a beautiful thing!

Summary of US Treasury Secretary Bessent’s Comments

·       Neither side wants a decoupling

·       We would like to see China be more open to US goods

·       We think there is a possibility of purchase agreements to bring the bilateral trade deficit into balance

·       We ended up with a result that is very good for the US and China

·       We'll pass one big, beautiful bill by mid-summer

·       China has not yet rebalanced towards a consumption-oriented economy

·       The UK and Switzerland have moved to the front of the queue for trade deals, EU is much slower

·       We wanted a decoupling with China for strategic necessities

·       We are going to protect our steel, semiconductor industries, and selected medicines

·       Believe China is now serious about halting fentanyl flows into the US

·       We will see what we can do to work on non-tariff barriers

·       Bessent asked if we will meet with China again: Imagine we will meet again in the next few weeks

·       We want China to rebalance its economy toward more consumption

·       There is a chance to rebalance together, we'll see if it's possible

·       Phase one trade deal with China offered a template

·       Will see where the final China reciprocal tariff ends

·       April 2nd level of 10% would be a ceiling for China

·       We now have a process in place to avoid China's escalation

·       It's implausible that tariffs on China go below 10%

·       China met phase-one obligations until Biden neglected

·       Escalatory tariffs were like a US-China embargo

·       Can always go back to the April 2nd level for China tariffs

·       I could see a Trump-Xi call happening in the coming weeks or months

·       Trump viewed 80% as not an embargo for China

·       If China acts, perhaps the fentanyl tariff could come down

·       It is implausible that tariffs on China go below 10%

·       I hope most trade and tariffs are settled by the year-end

·       The tax bill is moving better than I could have imagined

·       Deregulation should start kicking in Q3 and Q4

·       I could see a Trump-Xi call happening in the coming weeks, months

·       Bessent sees tariff agreement as progress in 'strategic' decoupling with China

Summary of USTR (Greer’s) Comments:

·       If things do not work out, China tariffs can increase

·       If things don’t work out, China tariffs can go back up

·       The Fentanyl issue remains unchanged for now

·       Fentanyl is on its track, but a very positive track. We are having very constructive conversations

·       There was no discussion on currency

·       The Trump administration is working hard to control the fiscal deficit

·       When asked about the toughest part of negotiation, It was trying to repair channels of communication from past administrations.

·       We will get global trade into a better place.

·       We have tried hard to work within the multilateral system, but manufacturing went to China

Summary of White House Senior Adviser Hassett’s comments:

·       We're rebooting the relationship with China

·       The markets could expect some normalization of things

·       Regulation cuts are going to accelerate

·       We have 24 deals lined up over the next few weeks

·       The tax bill keeps the current treatment of carried interest

·       There are 24 countries lined up for trade talks over the next weeks

·       The US is to continue negotiations with China

·       Unfreezing rare earth was part of the US-China discussions

·       We will discuss labor and capital with China in further talks

White House Officials:

·       The Health Secretary will set clear targets for price reductions for US drug prices within 30 days

·       The Commerce Department will consider export restrictions that enable low drug pricing abroad

China Commerce Ministry:

·       We held a meeting with foreign trade companies on Monday.

·       China and the US trade discussions created conditions for further bridging differences and deepening cooperation

·       We will support trade companies to expand the market

·       Trade announcement will be positive for global economy: Chinese official

·       China says Geneva trade talk meeting a first step; differences &frictions remain; win-win

China Finance Ministry:

·       The substantial reduction in tariffs between China and the US meets the expectations of producers and consumers in both countries, and it is conducive to economic and trade exchanges between the two countries

·       China Finance Ministry to cancel additional tariffs imposed on the US products under two later rounds of measures

China's Vice Premier He Lifeng:

·       The meeting was an important first step

·       The meeting created the foundation and created conditions

·       There are some differences, but friction is unavoidable

·       The nature of China-US trade relations is a mutual win-win

·       We are going to inject more certainty and stability into the world economy

·       China is ready to work with the US to manage differences, extend the list of cooperation, make pie of cooperation bigger

·       China's Vice Premier He Lifeng asked to comment on the US trade deficit: It will be reflected in tomorrow's joint statement.

·       Any deal to be reached will be in China's development interest

Progress of US-EU trade talks

The US has welcomed EU ideas to cooperate on mutual investments and economic security challenges while continuing to provide little transparency on the possible outcomes of trade negotiations between the two sides, according to people familiar with the matter. The EU and US negotiators kick-started discussions last week, with the bloc submitting a menu of options that could form the basis of formal trade talks. The options include investments in areas such as liquefied natural gas and artificial intelligence, as well as working together in strategic sectors like steel, cars, chips, aviation, pharmaceuticals, and critical raw materials.

Conclusions: 

China is in a better position of strength to win this long war of attrition on trade; the US has to reset completely to compete with mighty China. Unlike China/XI, US President Trump is under huge pressure from both Wall Street and Main Street for his constant flip-flops on tariff policies. Trump also has to ensure tariff policy stability rather than constant back & forth as US retailers, and MSMEs need to place advance orders for coming festival season sales by May to big exporters like China. Trump may soon scale back his Fentanyl levy of 20% on China as China will not and never pay any Trump tariffs; it will be paid by US importers and eventually borne by US consumers or even producers.

Trump’s unusually high tariffs (embargo) of 145% on Chinese goods were also leading to a potential imminent supply shock for the US economy; there are no easy alternatives to replace Chinese goods in terms of scale, efficiency, and costs for at least the next few years. The US economy WAS facing a severe supply shock, which could result in a significantly higher cost of living. If the US companies/importers can’t raise prices amid Trump's threat and increasing autocratic behavior, their financial health will deteriorate. Various influential Republican leaders were also openly criticizing Trump’s bellicose tariffs and other policies, which may affect the mid-term US election next year (November 26). Trump is set to lose his trifecta by Jan’27. Some Republican leaders and also most of the Democrats are now trying to take back Tariffs power from Trump to the US Congress for policy stability.

Bottom line

Trump may soon withdraw his 20% Fentanyl levy on China and the US will continue 10% universal tariffs on all and sectoral higher tariffs of 20% -25% on metals, automobiles, and pharmaceuticals along with selected exemptions. But even at around 15%-20% weighted average tariffs, it’s still substantially higher than 2.5% prior, which will inevitably cause a higher cost of living for Americans, subdued discretionary consumer spending, tepid private capex, higher unemployment and lower economic growth. In other words, the US economy may be heading for a stagflation-like scenario in the coming days unless there is a corresponding increase in real income along with productivity.

Market Impact

On Tuesday, May 13, 2025, Wall Street closed mixed on US-China trade truce and cooling inflation report. The S&P 500 surged around 0.7%, reclaiming positive territory for 2025, while the Nasdaq 100 jumped almost 1.6%, driven by a sharp rebound in chipmakers. Nvidia soared after announcing a major AI chip deal with Saudi Arabia, lifting peers like AMD and Broadcom more than 4%. The Dow Jones (DJ-30) lagged, falling around 0.6% as UnitedHealth shares plunged following the CEO’s departure and the suspension of forward guidance. Wall Street was further buoyed by a $600 billion investment initiative from the White House and a cumulative $1T investment commitment by Saudi Arabia (including private ones). Various big US MNCs including Tesla have also inked various business deals with Saudi Arabia.

On Tuesday, Wall Street was boosted by techs, energy, consumer discretionary, communication services, industrials, financials, and utilities, while dragged by healthcare, real estate, and consumer staples. Dow Jones (DJ-30) was boosted by NVIDIA, Caterpillar, Boeing, Goldman Sachs, IBM, Amazon, JPM, American Express, Apple, and Chevron, while dragged by United Health, Merck, J&J, Amgen, P&G, Travelers, Walmart, McDonald’s, Verizon and Coca-Cola. Oil surged on Trump’s secondary oil sanctions on various Iranian oil carriers (shipping network) to China. Gold edged up after falling from around 3425 to 3200 amid an easing of US-China trade war tensions and US recession, but surged 0.4% on a softer inflation report.

Weekly-Technical trading levels: DJ-30, NQ-100, and Gold

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 41400) now has to sustain over 41800 for a further rally towards 42000/42500-43000/43500, and even 44600-45200 in the coming days; otherwise sustaining below 41700, DJ-30 may again fall to 41000/40600-4010039900 and 39700/38600-38000/37700-37300/37000 in the coming days.

Similarly, NQ-100 Future (20200) has to sustain over 20800 for a further rally to 21100/21400-21700/22000 and 22400-22600 in the coming days; otherwise, sustaining below 20750/20600-20500/20400, NQ-100 may again fall to 20000/19600-19400/19200 and 19100/18800-18600/18000-17600/16400 and 16200-15800 in the coming days.

Also, technically Gold (CMP: 3240) has to sustain over 3300 for any recovery to 3325/3375* and 3400/3425-3450/3505*, and even 3525/3555 in the coming days; otherwise sustaining below 3290-3275, Gold may again fall to 3255/3225-3200/3165* and further to 3130/3115*-3075/3015-2990/2975-2960*/2900* and 2800/2750 in the coming days.