The US and China have agreed to a 90-day pause to their trade war after two days of talks in Geneva, with the US slashing tariffs it imposed earlier this year on Chinese goods from 145% to 30% — encompassing the 10% baseline US tariff and an additional 20% linked to fentanyl trafficking — while China lowered its tariffs on US imports from 125% to 10%, according to a joint statement out yesterday.

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The agreement marks the first meaningful de-escalation since the latest round of tit-for-tat tariffs began in April, when Washington ramped up levies on Chinese goods as part of its “reciprocal tariffs” campaign, prompting an equally aggressive response from Beijing. US Treasury Secretary Scott Bessent said the recent levels had amounted to a de facto blockade of trade between the world’s two largest economies — one that neither side wanted to see hardened into a permanent rupture.

China’s public messaging struck a similarly cautious tone. A white paper published yesterday by state media underscored Beijing’s commitment to mutual respect in trade relations, while vowing to expand its toolkit to counter foreign sanctions and “long-arm jurisdiction.” At the same time, Chinese officials sought to frame the agreement as a win, with ING’s chief China economist Lynn Song noting the lack of direct concessions required of Beijing.

Bessent emphasized that Washington’s approach isn’t about wholesale disengagement. “The US is going to do a strategic decoupling in terms of the items that we discovered during Covid were of national security interests — whether it’s semiconductors, medicine, steel,” Treasury Secretary Scott Bessent told Bloomberg, underscoring the administration’s intent to maintain pressure on critical supply chains while easing tensions more broadly.

The agreement is more of a ceasefire than a lasting settlement: More Talks are expected to continue in the coming weeks, with both parties leaving the door open to extending the three-month truce if progress is made. Bessent hinted that if China were to engage more directly on curbing the fentanyl trade, further relief could be possible. Still, he described it as “implausible” that US tariffs on China would fall below the 10% mark.

Trump said upcoming talks will focus on “opening up” China to American business, noting that many of the tariffs he imposed will remain in place for now. He added that he expects to speak with President Xi Jinping later this week, but cautioned that putting a comprehensive deal on paper would take time.

HOW MARKETS TOOK ALL OF THIS-

American markets rallied on the news, with the S&P 500 jumped 3.3% by the end of trading yesterday, while the Nasdaq finished the day up 4.4% following the news. The USD gained 1.4%.

The rally came at the expense of traditional safe havens, with gold tumbling more 3.5% to USD 3,228 an ounce, pulling back from last month’s record highs, along with some safe-haven currencies.

The VIX index — Wall Street’s so-called “fear gauge” — dropped below the cutoff 20 mark yesterday for the first time since 28 March, suggesting a potential shift toward calmer market sentiment. The VIX rose to a 5-year high of 45.3 on 4 April fueled by Donald Trump’s tariff announcements. The last spike before that was in March 2020 when it reached 85.5 in reaction to Covid.

MARKETS THIS MORNING-

Asian markets are mostly in the green this morning. Japan’s Nikkei is up 1.7%, the Shanghai Composite is looking at gains of 0.2%, and Korea’s Kospi is up 0.4%. Meanwhile, the Hang Seng is down 1.3% in early trading.

TASI

11,489

+1.3% (YTD: -4.6%)

MSCI Tadawul 30

1,468

+1.2% (YTD: -2.7%)

NomuC

27,343

-0.3% (YTD: -13.1%)

USD : SAR (SAMA)

USD 3.75 Sell

USD 3.75 Buy

Interest rates

5.0% repo

4.5% reverse repo

EGX30

31,577

+0.5% (YTD: +6.2%)

ADX

9,639

+0.1% (YTD: 2.3%)

DFM

5,333

+0.4% (YTD: +3.4%)

S&P 500

5,844

+3.3% (YTD: -0.6%)

FTSE 100

8,605

+0.6% (YTD: +5.3%)

Euro Stoxx 50

5,392

+1.6% (YTD: +10.1%)

Brent crude

USD 64.98

+1.7%

Natural gas (Nymex)

USD 3.65

-3.9%

Gold

USD 3,228

-3.5%

BTC

USD 102,595

-1.2% (YTD: +9.5%)

Sukuk/bond market index

913.40

-0.1% (YTD: +1.3%)

S&P MENA Bond & Sukuk

143.4

-0.1% (YTD: +2.5%)

VIX (Fear gauge)

18.95

-13.5% (YTD: 13.7%)

THE CLOSING BELL: TADAWUL-

The TASI rose 1.3% yesterday on turnover of SAR 6.1 bn. The index is down 4.6% YTD.

In the green: SAUDI CERAMICS (+10.0%), BATIC (+7.8%) and NASEEJ (+7.4%).

In the red: SHL (-3.9%), MAHARAH (-3.7%) and ALMUNAJEM (-1.5%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.3% yesterday on turnover of SAR 69.2 mn. The index is down 13.1% YTD.

In the green: MUNAWLA (+9.9%), FUTURE VISION (+8.2%) and ALBATTAL FACTORY (+8.0%).

In the red: AME (-14.2%), EDARAT (-5.0%) and NBM (-4.4%).

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