Introduction
In a surprise but highly welcomed geopolitical development, the United States and China reached a truce on trade tariffs on May 30, 2025, ending months of escalating trade tensions that had rattled global markets. The agreement, announced jointly by U.S. Treasury Secretary Janet Yellen and Chinese Vice Premier Liu He, halts further tariff hikes and outlines a roadmap for gradual tariff rollback on strategic goods, particularly in technology and semiconductors.
The announcement triggered an immediate surge in risk sentiment, sending major equity indices sharply higher, with tech stocks leading the rally. The Nasdaq Composite posted its best single-day gain since January, while U.S. Treasuries sold off modestly amid a shift away from safe havens. In commodities and currencies, the dollar weakened and copper prices soared on expectations of improved global trade flows. The truce has wide-ranging implications, particularly for multinational corporations dependent on U.S.–China supply chains, and it arrives at a time when both economies are grappling with slower growth and elevated inflation uncertainty.
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Market Reaction: Equities Surge on De-escalation
Wall Street responded enthusiastically to the truce. The Nasdaq Composite surged 3.6% to close at 15,720, led by chipmakers and tech giants with significant exposure to Chinese supply chains. The S&P 500 climbed 2.2% to 5,290, while the Dow Jones Industrial Average added 1.8%, closing at 39,520.
Tech stocks led the rally, with Nvidia up 5.9%, Qualcomm gaining 6.3%, and Apple advancing 4.1%. Semiconductor companies were the clear beneficiaries, following a commitment in the agreement to ease restrictions on advanced chip exports and reduce tariffs on certain integrated circuit components.
Investors interpreted the truce as a signal that geopolitical risk premiums could moderate, paving the way for smoother capital flows and renewed corporate investment.
Commodities: Copper, Oil React to Trade Optimism
Copper, often viewed as a barometer for global economic activity, jumped 4.7% to $10,650 per metric ton on the London Metal Exchange. The rally was driven by expectations that reduced trade friction will boost manufacturing output in both the U.S. and China.
Oil prices also rose, though more modestly. Brent crude gained 1.3% to $84.70 per barrel, while West Texas Intermediate (WTI) closed at $80.15, up 1.1%. The gains reflected hopes for stronger industrial demand but were tempered by still-elevated global inventories and cautious production stances from OPEC+.
Gold, a traditional safe haven, declined 1.6% to $2,285 per ounce as investors rotated into risk assets.
Currency Markets: Dollar Weakens, Yuan Rallies
In FX markets, the U.S. Dollar Index (DXY) declined 0.9% to 103.20 as risk appetite surged and safe-haven demand diminished. The Chinese yuan appreciated to 7.01 per dollar, its strongest level in two months, reflecting improving sentiment around China’s growth prospects and capital inflows.
The euro gained 0.7% to trade at 1.0960 against the dollar, while the Japanese yen firmed to 144.5 per dollar amid speculation that the Bank of Japan could take additional steps to normalize policy following a recent uptick in inflation data.
Cryptocurrencies: Bitcoin Rebounds, Ethereum Rallies
Crypto markets, which had seen moderate outflows earlier in the week due to risk aversion, rebounded sharply. Bitcoin jumped 4.2% to $66,780, while Ethereum rose 5.1% to $3,540. The broader rally reflected renewed investor confidence and a pickup in speculative positioning.
Sentiment was also buoyed by a stabilization in crypto ETF flows and reports that U.S. regulators are unlikely to introduce new restrictions in the near term, reducing one key source of policy risk.
Bonds and ETFs: Yields Rise as Risk-On Trade Dominates
The U.S. Treasury market experienced a moderate selloff, with the yield on the 10-year note rising 6 basis points to 4.46%, and the 2-year yield climbing to 4.88%. The move reflected reduced demand for safety and increased expectations for stronger economic growth amid trade stabilization.
ETFs tracking emerging markets and technology stocks saw strong inflows. The iShares MSCI Emerging Markets ETF (EEM) jumped 2.8%, while the Invesco QQQ Trust (QQQ), which mirrors the Nasdaq 100, surged 3.5%. The VanEck Semiconductor ETF (SMH) gained 4.9%, its largest single-day gain in over three months.
Economic Data: U.S. Consumer Spending Slows
Amid the optimism, macroeconomic data released on May 30 offered a more mixed picture. U.S. personal consumption expenditures (PCE) rose just 0.1% in April, below expectations of 0.3%, signaling softer consumer activity. The core PCE deflator, the Federal Reserve’s preferred inflation gauge, increased 0.2% month-over-month and 2.7% year-over-year, in line with forecasts but still above the Fed’s 2% target.
The softer spending data contrasted with the market’s exuberance, but traders largely dismissed the miss as temporary and driven by weather and seasonal distortions.
Central Bank Implications: Fed Path Remains Unchanged
Despite the tariff truce, the Federal Reserve is unlikely to alter its policy trajectory immediately. Fed Governor Michelle Bowman, speaking at a finance conference in Dallas, reiterated that “inflation remains elevated” and that the Fed is not yet confident enough to begin cutting rates.
Market pricing reflects a roughly 60% probability of the first Fed rate cut occurring in September, unchanged from earlier in the week. However, should the trade thaw result in stronger economic data and continued disinflation, the Fed may gain flexibility later in the year.
In China, the People’s Bank of China (PBOC) is expected to maintain its current accommodative stance, though analysts now anticipate fewer aggressive easing measures given the improved trade outlook.
Corporate Reactions: Supply Chain Optimism
Multinational corporations welcomed the truce. Apple’s CEO Tim Cook praised the agreement as “a constructive step toward restoring supply chain resilience.” Similarly, Tesla announced plans to expand its Shanghai Gigafactory production over the next 12 months, citing better policy clarity.
U.S. industrials and logistics companies also surged. Caterpillar rose 3.2%, and FedEx gained 2.9% as investors anticipated higher trade volumes and capital spending.
Notably, Intel, which has struggled with export restrictions to China, saw its stock rise 5.4% following news that the agreement includes a review mechanism to reassess chip-related tariffs on a quarterly basis.
Global Impact: Emerging Markets and Europe
Emerging markets rallied broadly, benefiting from both dollar weakness and expectations of stronger global trade. Brazil’s Bovespa gained 2.1%, and India’s Nifty 50 climbed 1.7%. In Europe, the Stoxx 600 rose 1.5%, led by exporters and automakers. Germany’s DAX index surged 2.2%, boosted by BMW and Siemens.
Analysts noted that Europe, often caught in the crossfire of U.S.–China trade disputes, stands to gain materially from a reduction in global tensions. The euro area’s industrial PMI has been struggling near contraction territory, and any uptick in demand from China would offer welcome relief.
Conclusion
The U.S.–China tariff truce marks a turning point in what had become an increasingly tense bilateral economic relationship. By pausing tariff escalations and laying groundwork for mutual reductions, both nations have signaled a shift toward pragmatism and economic stabilization. The market reaction was swift and broad-based: equities surged, commodities rose, and currencies adjusted to reflect reduced risk.
While macroeconomic indicators in the U.S. show signs of moderation, and inflation remains sticky, the return of trade cooperation offers a counterbalance that could stabilize growth expectations. For the Federal Reserve, the development doesn’t fundamentally shift its short-term outlook, but it does reduce a major tail risk. Investors will now watch closely to see if the tentative peace holds and whether further economic diplomacy can unlock new upside for global markets.
Looking ahead, key questions remain: Will the truce lead to a formal trade agreement? Can structural issues—like IP protection and tech competition—be resolved amicably? And will improved sentiment translate into sustained investment and economic momentum?
For now, however, markets have a clear message: De-escalation is bullish, and cooperation—however fragile—is good for business.
