Markets Rally on Hopes of Tariff Easing: U.S.-China Talks, A Trade Truce or a Temporary Lift?
ACY Securities - Jasper Osita
Overview
Global markets just got another dose of good news. Or is it?
The trade war fog “MAY” finally be lifting. Financial markets lit up this week after Washington signaled a possible easing of tariffs on Chinese imports—sparking hopes of a breakthrough in the long-running U.S.-China trade dispute.
Is this a sustainable shift or just headline-driven euphoria?
In this blog, we break down:
- The key policy signals from Washington and Beijing
- How global indices, FX, and commodities responded
- Why the rally may be more speculative than structural
- And a step-by-step strategy guide on how to navigate this market shift like a pro
Whether you're a trader looking to capitalize on short-term momentum, or an investor monitoring macro signals, this post arms you with the insight—and the caution—you need to act smart in uncertain times.
With President Trump and Treasury Secretary Scott Bessent both hinting at a tariff rollback, investors welcomed the news with open arms. Stocks surged, the dollar softened, and commodities gained ground—all signs of growing optimism that trade tensions may be cooling off.
Washington Hints at Easing Tariffs on China
In a major shift, President Donald Trump suggested that the current 145% tariffs on Chinese goods could be “substantially reduced,” from the prior to between 50% percent and 65% though not eliminated. Treasury Secretary Scott Bessent took it further, calling the tariffs “unsustainable” and comparing them to a de facto trade embargo.
“We’re open to scaling back tariffs—if China is ready to do the same,” Bessent told business leaders during a closed-door session with JPMorgan.
His comments come as pressure mounts from retailers, manufacturers, and Wall Street to de-escalate a trade conflict that’s weighed on global growth for years.
China Responds Cautiously, But Door Is Open
Though the 90-day suspension didn’t extend to China, Washington's tone is clearly shifting. Bessent has publicly acknowledged that current China tariffs are unsustainable, comparing them to a “trade embargo.”
Beijing’s initial response? Careful, but not dismissive.
Chinese officials have made it clear they’re open to renewed talks—as long as there’s mutual respect and no threats. That’s a shift from earlier hardline tones, and it suggests both sides may be ready to talk deals instead of drawing lines.
Global Markets React to the Tariff News
The dual headlines—a tariff pause and potential U.S.-China tariff cuts—sent a wave of risk-on sentiment through global markets.
U.S. Stock Market
- Nasdaq Composite: +2.3%
- S&P 500: +1.4%
- Dow Jones Industrial Average: +1.0%
Walmart - 4-Hour Chart
Target - 1-Hour Chart
Retail giants like Walmart and Target rallied at the open on hopes of lower import costs but dissipated at the afternoon session.
European and Asian Markets
- German Dax: +4%
- FTSE 100: +1.5%
- Hang Seng Index: +1.45%
Currency and Commodities
- Dollar pulled back strong benefitting from a change of tone from Washington over tariffs.
- British pound jumped to a 7-month high at $1.34 but quickly went down afterwards, with Dollar gaining traction.
- Gold briefly surged above $3,500/oz before retreating signaling profit taking and/or risks starts to dissipate with temporary calmness in the trade war.
Are We in Risk-On Mode? Or Still in Wait-and-See?
While this week’s rally reflects a classic risk-on response, some investors are still urging caution. The key issue: nothing has been formally signed. Tariff relief is still hypothetical, and market optimism is pricing in diplomacy that hasn’t yet happened.
- Volatility remains high, and global growth risks haven’t disappeared
Since early April, the Volatility Index (VIX) has started to ease, signaling a gradual decline in market fear. While it remains elevated above 30, the encouraging sign is that investor anxiety is cooling—driven by optimism over potential trade breakthroughs between the U.S. and its global partners.
- Inflationary pressures and interest rate uncertainty continue to weigh on longer-term outlooks
- If China doesn’t reciprocate or the U.S. backtracks, the current rally could quickly unwind
In short: yes, markets are leaning risk-on, but it's more of a speculative rally than a confirmed reversal. Traders may want to enjoy the upside—but stay nimble in case headlines shift again.
“Rally might be temporary.” says Cameron Systermans - Mercer Head of Multi-Asset Asia and Japan
Actionable Approach: How Can You Navigate the Tariff-Driven Rally
While the headlines are promising, the truth is this rally could be built on hope, not certainty. For traders and investors, that means opportunity—but only with discipline.
Here’s how to navigate the current environment:
- Trade the Reaction, Not the Assumption
- The market is pricing in a potential tariff cut—not a confirmed deal.
- Wait for technical confirmations.
- Check out my contents for technical approach:
- https://acy.com/en/market-news/education/smc-playbook-series-part-2-spot-liquidity-pools-trading-j-o-103837/
- https://acy.com/en/market-news/education/ultimate-guide-market-trends-price-action-j-o-03252025-141804/
- https://acy.com/en/market-news/education/forex-trading-strategy-beginners-j-o-03272025-101033/
Approach: Consider short-term momentum trades on confirmed catalysts. Use tight stops in case sentiment turns.
2. Hedge with Safe Havens or Volatility Products
- VIX remains above 30 — a signal that market fear is still present.
- While gold and bonds retreated, they could surge again if talks stall.
Below are links to help you navigate whether the market is risk-on or risk-off sentiment.
3. Use Economic Calendar and Trade Windows Wisely
Check out Finlogix economic calendar: https://www.finlogix.com/calendar
- With trade talks and macro headlines driving sentiment, timing is crucial.
- Avoid low-liquidity hours and hold-through-weekend risk during news-sensitive weeks.
4. Monitor the Tone, Not Just the Data
- Pay close attention to:
- Speeches by Trump, Bessent, or Chinese officials
- Language like “open to negotiation,” “progress,” or “deadlock”
- Risk barometers like JPY strength, bond demand, or gold intraday volatility
Approach: Stay nimble. Don’t marry trades. The market can flip on one headline.
Final Take
The global trade war has been a drag on growth, markets, and investor confidence for years. This week, we may have seen the first signs that a reset is possible.
The 90-day tariff suspension provided immediate breathing room for global trade partners. And now, potential tariff cuts on Chinese goods could be the breakthrough markets have been waiting for. The road to a deal won’t be easy—but for now, the tone is improving, and the markets are responding.
This could be the start of something bigger—or just another false dawn. Be optimistic, but strategic. Opportunities are there—but only for those who manage risk while others chase headlines.
Check Out Our Market Education
Learn how to navigate yourself in times of turmoil. Check out my market education links:
Want to learn how to trade like the Smart Money? Check out my new contents:
https://acy.com/en/market-news/education/smc-playbook-series-beginners-guide-j-o-04032025-155530/
Follow me on LinkedIn: https://www.linkedin.com/in/jasperosita/
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