Trade Truce: U.S. and China Hit Pause on Tariffs

In a significant move, the U.S. and China have decided to temporarily reduce the steep tariffs they had imposed on each other, providing relief to global stocks and the U.S. dollar. With the U.S. reducing tariffs from 145% to 30% and China lowering its tariffs from 125% to 10%, the decision marks a pause in the trade war between the world's two largest economies.

Financial markets responded positively to this development in light of a conflict that had significantly disrupted nearly $600 billion in two-way trade. Concerned about the impacts of the trade war, investors had feared stagflation—high inflation and weak economic growth. As news of the agreement spread, Wall Street stocks surged, while safe-haven investments like gold experienced a decline.

This temporary tariff reduction signals a possible decline in trade tensions, but longstanding issues remain unresolved. Investor confidence was bolstered by the agreement, although experts caution that the 90-day period may be insufficient to address deeper concerns about non-tariff barriers. Discussions are set to continue, focusing on opening up China's market to American businesses.

(With inputs from agencies.)