U.S. stocks soared on Monday morning following an agreement between the U.S. and China to reduce tariff rates for 90 days, signaling a potential easing of trade tensions. The Dow Jones Industrial Average jumped by 1,044 points, a 2.5% increase, while the S&P 500 and Nasdaq saw gains of 2.9% and 4%, respectively.
Treasury Secretary Scott Bessent announced on Monday that discussions with China in Geneva had been productive, leading to a 115% reduction in tariff rates for 90 days. This adjustment lowers U.S. tariffs on Chinese goods to 30% and Chinese tariffs on U.S. imports to 10%. A separate 20% tax on Chinese imports, related to fentanyl smuggling, remains in effect.
Shares in tech and electronics firms, many of which manufacture in China, saw notable gains. Apple's stock increased by 5.1%, while Amazon's stock soared by 8.6%. Dell Technologies shares also jumped by 7%. Retailers of electronics also benefited, with Best Buy shares climbing 8.1%.
According to Carol Schleif, chief market strategist at BMO Private Wealth, the tariff reduction and framework for continued discussion are positive signs for the stock market. The 90-day pause is timely for retailers preparing for back-to-school and holiday shopping seasons. Prior to this pause, consumers and businesses faced high costs from tariffs, potentially increasing prices on electronics, clothing, and toys.
While the new tariff rates are lower than the initial 145% tax imposed by the U.S. and China's retaliatory 125% duty, they remain higher than pre-tariff levels. Schleif noted that some economic damage is expected in the coming months. The trade war has already impacted economic reports, with GDP shrinking in the first quarter of 2025 as U.S. companies imported goods ahead of tariff deadlines.