Tech Stocks Leap as US-China Tariff Reduction Sparks Rally

2025-05-13 economy

New York, Tuesday, 13 May 2025.
The Nasdaq 100 surged into a bull market as the US and China agreed to reduce tariffs for 90 days, boosting tech stocks like Tesla and Nvidia amidst renewed market optimism.

Market Euphoria and Economic Implications

On Monday, May 12, 2025, the Nasdaq 100 reached bull market territory following a substantial rally driven by tech stocks. The primary catalyst for this surge was the announcement of a temporary reduction in tariffs between the US and China. This agreement, which commenced on May 12, 2025, will see tariffs significantly slashed for a 90-day period. Before this deal, tariffs on Chinese products were as high as 145%; they will now be reduced to 30%. In return, China’s tariffs on US goods will drop from 125% to 10% [1][2][3]. This de-escalation in trade tensions has positively influenced the stock market, particularly among technology firms that rely heavily on Chinese supply chains and markets [1][2].

The Reaction of Major Tech Stocks

The reduced tariffs had an immediate and pronounced impact on the stock prices of major tech companies. Tesla and Nvidia, notable components of the Nasdaq 100 index, experienced substantial gains of 7% and 5%, respectively, during Monday’s trading session. Other giant tech entities, often collectively referred to as the ‘Magnificent Seven,’ also registered significant upticks. For example, shares of Apple increased by 6.3%, while Amazon saw an 8% rise [1][2][3]. Observers highlight that this surge underscores robust investor confidence, largely driven by the anticipated boost in profitability and competitive positioning for these firms with operations linked to China [2][5].

A Broader Economic Context

The impact of reduced tariffs extends beyond just stock valuations. The US and China’s tentative truce represents a potential reduction in geopolitical tensions that have vexed markets for the past few years. Economists suggest this tariff reduction will allow for increased efficiencies across global supply chains, leading to potentially lower consumer prices and higher corporate earnings [1][6][7]. However, some analysts caution that while the 90-day window represents a significant relief, it remains unclear whether a lasting resolution will be achieved. As such, some volatility may persist as markets react to ongoing talks and potential policy shifts [3][7].

Looking Ahead: Prospects and Challenges

While the market responds positively to the temporary tariff reduction, the broader economic outlook remains contingent on the progression of US-China negotiations. Scheduled discussions for June 2025 aim to solidify a comprehensive trade agreement. The 90-day window places pressure on both nations to address longstanding issues, ranging from intellectual property rights to market access [6][8]. Despite the optimism, experts like Tai Hui from J.P. Morgan Asset Management express concerns that the temporary nature of this agreement may not resolve all underlying trade tensions. Investors are advised to monitor developments closely as they could significantly affect global economic stability [6][7][9].

Sources

tech stocks tariff agreement