The 90-day tariff cut between the US and China has taken markets and economists by surprise – not because it happened, but because of its scale. As announced on Monday, tariffs on US exports to China will fall from 125 per cent to just 10 per cent, while tariffs on Chinese exports to the US will be reduced from 145 per cent to 30 per cent.
In response, sharemarkets rallied sharply with the Dow Jones index rising by 1,161 points or 2.8 per cent to close at its highest level since 26 March. The S&P 500 index jumped 3.3 per cent to its highest closing level since 3 March, while the Nasdaq Index added 779 points or 4.4 per cent, lifting to its highest close since 2 February.
Speaking to InvestorDaily, AMP’s Shane Oliver said the trade truce is certainly good news, especially for sharemarkets.
“The good news is that the average US tariff rate on imports has fallen from a high of over 30 per cent just after ‘Liberation Day’ to now back to around 14 per cent and it’s clear that Trump is responsive to pressure from sharemarkets and worries about a US recession and rising inflation,” the chief economist said.
“What’s more, the tariffs appear to be a bit more about negotiation and a bit less about bringing production back to the US,” he added.
However, Oliver highlighted that the lower, approximately 14 per cent average US tariff, is still nearly five times higher than it was earlier this year, and expressed worry that sharemarket performance could embolden President Trump to go hard again.
“The 10 per cent tariff on everyone looks like a firm baseline and things could still worsen again if progress is not made between the US and other countries in the 90-day negotiation periods.
“In fact, the surge in sharemarkets add to the risk that Trump might feel emboldened to ramp up the pressure again. Against this back drop, companies will still be uncertain,” Oliver said.
Ultimately, while Oliver acknowledged the worst-case scenario has been removed, with the risk of US recession falling, he noted that global and Australian growth is still likely to weaken.
“And it will likely remain volatile in investment markets for a while yet,” Oliver said.
In its latest weekly update, BlackRock similarly cautioned that tariffs will up inflation and hurt growth, with recession-like effects in coming quarters.
“Yet the cumulative impact on overall 2025 activity may be more limited,” the global asset manager said, adding that a path to avoiding a US contraction over 2025 as a whole has opened up.
Tai Hui, APAC chief market strategist at JP Morgan Asset Management, said that while he is concerned the 90-day period may not be sufficient for the two sides to reach a detailed agreement, “it keeps the pressure on the negotiation process”.
“The magnitude of this tariff reduction is larger than expected. This reflects both sides recognising the economic reality that tariffs will hit global growth and negotiation is a better option going forward,” Hui said.
Overall, JP Morgan Asset Management expects the market to get back to a risk-on sentiment in the near term.
Last month, speaking on the Relative Return Insider podcast, economist Dr Vladimir Tyazhelnikov from the School of Economics at Sydney University said the Trump administration’s aggressive use of tariffs has sparked serious concerns about fairness, transparency and the potential for insider trading.
Tyazhelnikov explained that, although tariffs have been framed as tools to protect domestic industries, the US administration’s unpredictable use of them has caused volatile market swings, with some companies appearing to benefit disproportionately – raising concerns about potential insider advantages.
“Which companies will be exempt from tariffs [and] which are not, depends on one person who makes these executive decisions,” the economist said, alluding to the controversial $1 million-per-head dinner at Mar-a-Lago last month that many speculate may have played a significant role in shaping US policy on AI chip exports to China.
“I guess it’s a question to the American lawyers, but it definitely does not seem like it is transparent when policy leads to such huge changes on the stock market.”
Economists and market pundits aren’t the only ones questioning Trump’s tariffs. Last month, Senator Elizabeth Warren, the top Democrat on the Senate banking committee, accused Treasury Secretary Scott Bessent of sharing “inside information” about Trump’s tariff plans with Wall Street insiders, bypassing the public.
At a closed-door JPMorgan Chase event on Tuesday, Bessent allegedly suggested that the US–China tariff stand-off would soon de-escalate. When news of his comments leaked, stocks surged, with Trump later confirming Bessent’s remarks to reporters.
Warren also claimed that Trump’s “opaque decision making on tariffs and frequent, seemingly random changes” appear designed to benefit well-connected investors who receive information before the public.
While these allegations have prompted calls for investigations, legal experts suggest that proving insider trading in this context may be difficult.
US think tank PolitiFact suggested just last month that holding President Trump accountable for insider trading is unlikely due to his presidential immunity, making private lawsuits his only potential risk, although proving illegal conduct would be challenging.
