US stocks rallied amid the US-China agreement to rollback tariffs for 90 days - Newsquawk Asia-Pac Market Open

US stocks rallied following the positive trade developments between the US and China, which both agreed to cut tariffs on each other by 115ppts for an initial period of 90 days in what was a much larger than expected rollback. The combined 145% US tariffs on China and China's levies on US goods will drop to 30% and 10%, respectively. The announcement spurred global risk-on trade with upside in the Dollar, US equities, and crude, while havens sold off.
USD saw broad-based strength amid the de-escalation in the trade war following the US-China agreement to reduce tariffs by 115% on each other's goods which resulted in the largest gain in the DXY since November last year. Aside from trade headlines, updates were thin with no tier one releases and the remarks from Fed's Kugler and Goolsbee provided very little incrementally, while the attention now turns to US CPI data on Tuesday.
Looking ahead, highlights include Australian Building Approvals, Westpac Consumer Sentiment, NAB Business Confidence, BoJ Summary of Opinions, Supply from Japan.

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LOOKING AHEAD

Highlights include Australian Building Approvals, Westpac Consumer Sentiment, NAB Business Confidence, BoJ Summary of Opinions, Supply from Japan.
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US TRADE

US stocks rallied following the positive trade developments between the US and China, which both agreed to cut tariffs on each other by 115ppts for an initial period of 90 days in what was a much larger than expected roll back. The combined 145% US tariffs on China and China's levies on US goods will drop to 30% and 10%, respectively. The announcement spurred global risk-on trade with upside in the Dollar, US equities, and crude, while havens sold off.
SPX +3.26% at 5,844, NDX +4.02% at 20,868, DJI +2.81% at 42,410, RUT +3.42% at 2,092.
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TARIFFS/TRADE

US-China joint statement stated the US is to cut tariffs on Chinese goods to 30% from 145% for 90 days and China is to cut tariffs on US goods to 10% from 125% for 90 days, while the US will modify the application of rate of duty on articles of China by suspending 24ppts of that rate for an initial period of 90 days although the US will retain the remaining rate of 10% on those articles and China is to retain the remaining ad valorem rate of 10% and remove the modified rate. Furthermore, it stated that talks may be undertaken on an alternating basis in China and the US ahead, or with agreement, in a 3rd party and they committed to a process of further talks.
US Treasury Secretary Bessent said they have come to an agreement on a 90-day pause and substantially moved down tariff levels whereby both sides will move down by 115ppts on reciprocal tariffs. Bessent said the US would like to see China open up more to US goods and the US thinks there is a possibility of purchase agreements to bring the bilateral trade deficit into balance, while he added they have a good mechanism to avoid an unfortunate escalation occurring again.
US Treasury Secretary Bessent said over the next 90 days we will see, but it has to be fair for the American people and noted that an unfortunate escalation happened with China, according to a Bloomberg interview. Bessent responded it is obviously a floor when asked if he considers the new level a ceiling or a floor and noted the 34% April 2nd level is a ceiling. Furthermore, he is not saying tariffs will go up but added it is implausible that the tariff level will go below 10% and stated they can always go back to April 2nd level for China tariffs, while the first level is that there will be a phone call with Trump/Xi although there is nothing currently scheduled.
US President Trump said "we achieved a total reset with China" but noted the agreement does not cover tariffs on cars, steel, aluminium or pharma, and he will speak to Chinese President Xi, maybe at the end of the week. Trump added that talks in Geneva were friendly, the relationship is very good and China agreed to open up. Trump separately commented that China tariffs would go up without a deal but noted that tariffs will not go back all the way to 145%.
USTR Greer said both sides committed to the 90-day pause period and effective embargo was not a sustainable practice for both sides, while the fentanyl issue remains unchanged as it stands and the final result is very good for the US and China with a constructive path forward for a positive conversation with the Chinese.
China’s Commerce Ministry said it is to suspend 24% of additional ad valorem tariffs for an initial period of 90 days on trade talks with the US and it will retain the remaining additional ad valorem rate of 10%. China will adopt all necessary administrative measures to suspend or remove the non-tariff countermeasures taken against the United States since April 2nd and the two sides will establish a mechanism to continue discussions about economic and trade relations, while the parties commit to taking the actions by May 14th. Furthermore, China's Commerce Minister said China and US trade talks created conditions for further bridging differences and deepening cooperation, while they will support trade companies to expand their market and MOFCOM also held a meeting on strengthening full-chain control of strategic mineral exports.
US-China trade deal does not cover "de minimis" exemptions for e-commerce firms, according to sources cited by Reuters. It was separately reported that White House Press Secretary Leavitt said unfreezing rare earth was part of US-China discussions.
US Treasury Secretary Bessent said the UK and Switzerland have moved to the front of the queue and the EU is much slower.
US President Trump said he will no longer tolerate profiteering from Big Pharma and he signed executive orders on drug prices, while he noted prices could come down by 59% to 90%. Trump said the EU has been brutal on drug prices and was the most difficult on drug subsidies, while he added the EU is nastier than China and the EU will come down a lot, as well as stated that the EU will have to pay more for healthcare. It was also reported that Trump said he will add on to tariffs if countries do not abide by the drug policy and there are many other deals coming in.
White House officials said the US Health Secretary will set clear targets for price reductions for US drug prices within 30 days and if adequate progress not made, most favoured nation pricing will be imposed via rule-making.

NOTABLE HEADLINES

Fed's Kugler (voter) said if tariffs are long lasting, the one issue she would be looking to is how supply chains get rearranged in the rest of the world, while she noted US/China tariff reduction is obviously an improvement as far as trade between countries go but is still pretty high and she still expects an increase in prices and slowdown in economy though not at the same rate as before.
Fed's Goolsbee (2025 voter) said tariffs would still have a stagflationary impulse and the temporary nature of the deal would weigh on the economy, while he added that the bar for action has to be high. Furthermore, he endorsed the waiting approach again due to uncertainty and said the Fed could afford to take time for policy decisions.
Fed SLOOS stated US banks reported a drop in demand for C&I loans in Q1, while it was the weakest for large firms since Q3 in a reversal of Q4 strength.
US President Trump posted "DRUG PRICES TO BE CUT BY 59%, PLUS! Gasoline, Energy, Groceries, and all other costs, DOWN. NO INFLATION!!! LOVE, DJT".
US President Trump is reportedly seeking USD 1tln in deals during his Gulf trip, according to Axios. Furthermore, the Qataris are expected to announce USD 200-300bln in deals and investments, including a "huge" commercial aircraft deal with Boeing (BA) and a USD 2bln deal to purchase MQ-9 Reaper drones, according to a source.
US President Trump posted "This week the Republicans are meeting in the Tax, Energy, and Agriculture Committees on major pieces of “THE ONE, BIG, BEAUTIFUL BILL.”
US House tax committee proposed to end consumer EV tax credit by end of year instead of 2032 and proposed to phase out of key clean energy tax credit (45y), with expiry in 2031, while it seeks to end in two years the 'transferability' of IRA tax credits that allow developers to sell credits to raise project funds.
US House Republicans' bill would exempt workers' tips from income tax, with exceptions and includes a tax break on overtime through 2028, while the SALT deduction cap increased to USD 30k for joint filers (prev. 10k), according to the bill text.

DATA RECAP

US Federal Budget (USD)(Apr) 258.0B vs. Exp. 256.0B (Prev. -161.0B)

FX

USD saw broad-based strength amid the de-escalation in the trade war following the US-China agreement to reduce tariffs by 115% on each other's goods which resulted in the largest gain in the DXY since November last year. Aside from trade headlines, updates were thin with no tier one releases and the remarks from Fed's Kugler and Goolsbee provided very little incrementally, while the attention now turns to US CPI data on Tuesday.
EUR was pressured by the firmer dollar and retreated to the beneath the 1.1100 handle, while the single currency was also not helped by renewed criticism from US President Trump who stated the EU has been brutal on drug prices, was the most difficult on drug subsidies, and is nastier than China.
GBP remained subdued after falling beneath the 1.3200 level and as comments from several BoE officials did little to provide support.
JPY weakened with USD/JPY at a firm footing above 148.00 amid haven outflows and as US yields climbed on the US-China trade war de-escalation.

FIXED INCOME

T-notes were pressured amid broad-based risk-on sentiment as US/China agreed to reduce tariffs.

COMMODITIES

Oil prices were bid to start the week with prices buoyed by China-US trade optimism after they agreed to cut their tariffs by 115ppts each for an initial period of 90 days although oil prices then gradually pared some of their gains on likely profit taking and as geopolitics also remained in focus with participants awaiting potential Russia-Ukraine talks this week.

GEOPOLITICAL

MIDDLE EAST

Israeli PM Netanyahu is reportedly sending Israeli negotiators to Doha to resume talks on a broader hostage and ceasefire deal after meeting with White House envoy Witkoff, according to Axios citing the PM’s office.
Senior Israeli official said Israel would not announce a ceasefire at the time of the release of Edan Alexander because the agreement does not obligate it to do so, according to Kann news.
US President Trump said there are very good things happening on Iran and that Iran is acting intelligently and is being reasonable. However, it was also reported that the US issued fresh Iran-related sanctions.

RUSSIA-UKRAINE

US President Trump believes that Russia will agree to a 30-day ceasefire and said they may have a good result out of the Istanbul meeting.

OTHER

Indian PM Modi said "we gave a free hand to the Indian army to bury the terrorists" and have only paused our military action against Pakistan, while he added will watch their behaviour and no nuclear blackmail will be tolerated by India.
Indian army said on talks with Pakistan military that they discussed issues related to commitment that both sides must not fire a single shot and initiate aggressive action, while they agreed that both sides consider immediate measures to ensure troop reduction from border and forward areas.

EU/UK