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Stocks soar after U.S. and China agree to temporarily slash tariffs

Traders work on the floor of the New York Stock Exchange (NYSE) at the opening bell on May 8, 2025, in New York City. Stocks surged on Monday after China and the U.S. clinched a temporary deal on tariffs.
Timothy A. Clary
/
AFP via Getty Images
Traders work on the floor of the New York Stock Exchange (NYSE) at the opening bell on May 8, 2025, in New York City. Stocks surged on Monday after China and the U.S. clinched a temporary deal on tariffs.

Updated May 12, 2025 at 4:32 PM EDT

Stocks rose sharply Monday after the U.S. and China from triple-digit tariffs that had brought much of the trade between the two countries to a standstill in recent weeks.

The Dow Jones Industrial Average soared more than 1,000 points, to gain around 2.8%, while the S&P 500 index gained 3.3%.

The surge in stocks came after the two countries agreed to slash the crippling tariffs for 90 days following talks in Geneva over the weekend. The tax on Chinese imports to the U.S. will drop from 145% to 30%, while the tariff China charges on U.S. goods will fall from 125% to 10%.

The pause comes after many businesses that rely on imports had halted deliveries to avoid paying a triple-digit tax. Cargo traffic at the Port of Los Angeles last week had fallen by more than a third from a year ago, raising the prospect of supply shortages in the near future.

The remaining tariffs are still significantly higher than Americans were used to paying, however, before President Trump launched his trade war.

Lower tariffs could still hit the U.S. economy

Even with the temporary reduction in tariffs, forecasters at the Yale Budget Lab say the U.S. is likely to have higher inflation and slower economic growth than it would have before the trade war started.

But the damage is less than the higher tariffs would have caused, had they remained in place. What's more, the lower tariff actually raises more revenue for the government, since more importers will grit their teeth and pay the tax, whereas the higher levy just brought imports from China to a standstill.

"This is one of the problems with tariffs as a revenue raising mechanism," says economist Ernie Tedeschi of the Budget Lab. "The lowering imports goal of tariffs runs completely against the revenue-raising goal."

Because the tariff relief has an expiration date while negotiations continue, there is still considerable uncertainty over what the trade landscape will look like in three months..

"I was surprised by how low the United States cut the tariffs as a result of this deal," Tedeschi says. "That opens up the possibility that tariffs with China will be lower than the market and businesses expected."

Copyright 2025 NPR

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.

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SOMOS CONNECTICUT es una iniciativa de ºÚÁϳԹÏÍø, la emisora local de NPR y PBS del estado, que busca elevar nuestras historias latinas y expandir programación que alza y informa nuestras comunidades latinas locales. Visita CTPublic.org/latino para más reportajes y recursos. Para noticias, suscríbase a nuestro boletín informativo en ctpublic.org/newsletters.

The independent journalism and non-commercial programming you rely on every day is in danger.

If you’re reading this, you believe in trusted journalism and in learning without paywalls. You value access to educational content kids love and enriching cultural programming.

Now all of that is at risk.

Federal funding for public media is under threat and if it goes, the impact to our communities will be devastating.

Together, we can defend it. It’s time to protect what matters.

Your voice has protected public media before. Now, it’s needed again. Learn how you can protect the news and programming you depend on.

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