US, China agree to slash tariffs that fueled markets' chaos: Live updates

The U.S. and China said Monday that they have agreed to slash reciprocal tariffs as the world's two biggest economies seek to end a trade war that has fueled fears of inflation and recession and disrupted financial markets around the globe.

U.S. markets rocketed higher after Treasury Secretary Scott Bessent told reporters the two sides had agreed tariffs would come down by over 100 percentage points. The U.S. will cut extra tariffs it imposed on Chinese imports in April to 30% from 145%, while Chinese duties on U.S. imports will fall to 10% from 125%. The new measures are effective for 90 days.

President Donald Trump, in a briefing early Monday, said key elements of the deal included pledges from China to open markets to American businesses and to eliminate "non-monetary" trade barriers. He said China also agreed to cut off the flow of fentanyl to the U.S.

The deal does not include tariffs on cars, steel, aluminum and pharmaceuticals, Trump said. He said he planned to speak with Chinese leader Xi Jinping "maybe at the end of the week."

"We are not looking to hurt China," Trump said. "They were very happy to do something with us.''

China's commerce ministry said the agreement will "lay the foundation to bridge differences and deepen cooperation."

Bessent and Trade Representative Jamieson Greer began meeting with their Chinese counterparts in Geneva on May 10 − just days after the Trump administration announced a deal with the United Kingdom.

Announcement 'just the start,' analyst says

Monday’s announcement was “clearly just the start” of broader and more comprehensive negotiations, Wedbush Securities analyst Dan Ives said in a note. That could mean new highs for the market and tech stocks in 2025. Ives said he believes tariffs have already caused economic damage, but the 90-day pause means supply chain concerns will be “significantly reduced.”  

This is “a huge win for the market and bulls,” Ives wrote. 

Chris Zaccarelli, chief investment officer for Northlight Asset Management, also said all-time highs in the stock market are on the table for 2025 after the pause with China – the U.S.’s “most difficult and potentially important” trading partner.  

“Markets are reacting extremely positively to the news that the Trump administration was using tariffs as a negotiating tactic after all,” Zaccarelli said in an emailed statement. 

Fed governor still expects slower growth

Tariffs will likely have “significant economic effects” even if recently announced lower levels hold, according to Federal Reserve Governor Adriana Kugler. Kugler said even the currently announced average rates are “still much higher” than in recent decades. That will likely mean slower economic growth and higher inflation, and companies could soon pass on higher costs to customers.

“Given these expected price increases, real incomes will fall, and operating costs will rise, which will lead consumers to demand fewer final goods and services and firms to demand fewer inputs,” Kugler said in prepared remarks for a Monday event at the Central Bank of Ireland.  

Kugler said shifting trade policies have made it difficult to judge the U.S. economy’s growth. She said she supported the Fed’s decision last week to keep interest rates steady and believes the Fed is “well positioned” for any changes to the macroeconomic environment.  

Trump credits trade for ceasefire between India and Pakistan

Trump said the ceasefire brokered May 10 between India and Pakistan averted a potential nuclear war − and that the deal resulted from U.S. threats to halt trade in the region. He credited the leadership of both countries with the “strength, wisdom and fortitude” to step back from the conflict.

“They were going at it hot and heavy, and it was seemingly not going to stop,” Trump said. “I said, ‘Come on. We’re going to do a lot of trade with you guys. Let’s stop it. Let’s stop it. If you stop it, we do a trade.’”

U.S. stocks roar after tariff news

Chinese Vice Premier He Lifeng described the meetings Sunday as "candid, in-depth and constructive" and said "substantial progress was made and important consensus was reached," according to China's state media.

"This was a larger-than-expected de-escalation ... though the negotiation process will likely remain challenging," said Lynn Song, chief economist of greater China at Dutch bank ING.

At 2 p.m. ET, the blue-chip Dow and broader S&P 500 were over 2.5% higher while the tech-heavy Nasdaq was up more than 4%. The benchmark 10-year Treasury yield reached 4.457%. Read more here.

− Medora Lee

JP Morgan bullish on China after 'surprisingly positive' deal

Investment bank JPMorgan lifted its forecasts for China's economic growth on Monday following announcement of a deal with the United States to dial down the countries' trade war.

"The magnitude of the temporary tariff reduction is larger than expected," analysts at the U.S. bank said in a statement. Replacement of the 34% "reciprocal" U.S. tariff on China with the 10% "universal" tariff that other countries also face was "surprisingly positive."

The analysts estimated the lower tariff rates, if maintained for the rest of the year, would allow China’s full-year GDP growth rate to hit 4.8% compared to the bank's previous forecast of 4.1%.

Trump executive order targets drug prices

An executive order Trump signed Monday directs the government to take actions against "discriminatory" policies in foreign countries that suppress drug prices abroad. The order tells the Department of Health and Human Services to adopt the policy, which would set prescription drug prices to match those of comparable countries.

Greer and the Commerce Department are directed to take action against "unreasonable and discriminatory policies in foreign countries that suppress drug prices abroad," a White House official speaking on background told reporters before the order was signed.

U.S. drug prices are nearly three times higher than 33 comparison countries, and the gap is growing, according to a 2024 report by HHS.

Trump said on social media the drug prices would be reduced by "59%, PLUS!" However, critics argue that drug companies could game the system by securing deals for rebates with foreign governments, thereby keeping U.S. drug prices high. Others say it could stifle innovation in medicine if the pharmaceutical industry loses profits. Trump's executive order figures to face legal challenges, as did his attempts to lower drug prices during his first term.

− Swapna Venugopal Ramaswamy and Ken Alltucker

Contributing: Reuters