Download the original PDF using the button below.
Why this U.S.-China trade progress matters now
A fresh 90-day agreement reverses much of April’s tariff shock, cutting headline U.S. tariff rates on Chinese goods from 145% to 30% and setting China’s rates on U.S. goods to 10%. Markets dislike uncertainty most; clarifying the tariff path has helped sentiment recover toward levels seen before April 2.
What’s in the agreement – and what’s next
- The deal sets a reciprocal baseline tariff near 10%, while keeping a separate 20% tariff tied to the fentanyl crisis in place for now.
- It lasts 90 days, aiming to de-escalate tensions and create space for a broader follow-on deal.
- Parallel moves include tariff pauses for other partners and a new U.K. trade deal with a 10% baseline, exemptions for steel/aluminum, and up to 100,000 imported cars at the baseline rate.
Pattern recognition: we’ve seen a version of this movie
This episode echoes 2018–2019: tariffs as negotiation levers ultimately produced Phase One with China, USMCA, and other agreements. The current administration went further than many expected with initial threats, but the recent pullback suggests the endgame could again be negotiated frameworks rather than a protracted trade war.
The economy’s backdrop: resilient, if uneven
- Jobs: April added 177,000 positions versus 138,000 expected; unemployment held at 4.2%.
- Inflation: CPI is 2.4% year over year, continuing a gradual glide toward the Fed’s target, helped by four-year-low oil prices.
- Fed policy: Markets now expect two to three rate cuts later in 2025; the Fed recently held 4.25%-4.50% and is taking a wait-and-see posture.
- Growth wobble: Q1 GDP dipped slightly as firms stockpiled imports ahead of tariff deadlines-behavior that often normalizes once rules are clearer.
Markets and mindset: recoveries can be surprisingly quick
History shows that the average market correction (post-WWII) is about 14% and can recover in roughly four months. Timing is unpredictable, and rebounds often begin while headlines still look gloomy. Overreacting to early volatility can leave investors misaligned with long-term goals.
What long-term investors can do
- Revisit your risk mix rather than trading headlines.
- Focus on cash-flow needs and time horizons.
- Use volatility to rebalance tax-efficiently.
- Keep an eye on tariff timelines and Fed meetings, but avoid making all-or-nothing bets. (General guidance based on the data above.)
Key takeaways
- A 90-day U.S.–China deal scales back April’s tariff shock and reduces uncertainty.
- The agreement maintains a separate 20% tariff related to fentanyl while setting a 10% baseline for most goods.
- A new U.K. agreement (10% baseline; car quota; steel/aluminum exemptions) suggests a negotiated path forward.
- Jobs steady, inflation easing, and patient Fed policy provide a constructive backdrop.
- Market pullbacks often recover faster than expected; staying diversified and disciplined still matters most.
FAQ
How long does the current U.S.–China agreement last?
Ninety days. It’s intended to cool tensions while parties pursue a broader deal.
Are tariffs going to zero?
No. Most goods move to a 10% baseline; a separate 20% tariff related to the fentanyl crisis remains in place.
Did markets recover after the April tariff shock?
Yes. Prices have rebounded toward pre-April 2 levels as uncertainty eased, though headlines can still drive swings.
What’s the Fed likely to do next?
Markets expect two to three cuts later this year; the Fed recently held at 4.25%-4.50% and is waiting for clearer data.
What should investors change today?
Consider rebalancing and aligning risk with goals rather than making big bets on short-term news. (General guidance.)
Ready to talk?
Ready to make your retirement income last? Schedule a call with Viridian Wealth Management or subscribe to our newsletter for smart, plain-English insights. Schedule a consultation | Subscribe to our newsletter
Disclosure
This material is for informational purposes only and is not intended as investment, tax, or legal advice. Investing involves risk, including possible loss of principal. Consult a qualified professional regarding your personal circumstances.