In a significant development for global trade relations, the United States and China have reached a temporary agreement to reduce tariffs, triggering a substantial rally in tech stocks, particularly benefiting industry giants Nvidia and Apple. The landmark decision, announced on 12 May 2025, represents a crucial shift in the economic relationship between the world’s two largest economies.

The agreement establishes a 90-day tariff reduction framework, with the United States maintaining a 10% baseline tariff rate on Chinese imports while suspending 24% of previously announced additional tariffs. This strategic move has immediately resonated across global markets, with technology sector stocks experiencing notable gains.

Nvidia, which recently achieved a remarkable $3 trillion market capitalisation, has emerged as a primary beneficiary of this trade policy adjustment. The semiconductor giant’s shares have demonstrated significant upward momentum, reflecting investor optimism about reduced trade barriers and improved market conditions for technology firms.

This diplomatic breakthrough arrives amid a complex backdrop of long-standing trade tensions between the two nations. The temporary tariff reduction scheme represents a calculated effort to stabilise international trade relations, particularly beneficial for companies heavily invested in cross-border commerce and global supply chains.

The impact extends beyond immediate market reactions, potentially catalysing increased investment flows and consumer spending patterns. The reduction in tariffs is expected to lower costs for imported goods, creating more favourable operating conditions for multinational corporations like Apple, which maintains significant manufacturing interests in China.

The technology sector’s enthusiastic response to this development underscores the interconnected nature of global trade and its influence on market valuations. The agreement’s temporary nature, however, emphasises the importance of continued diplomatic engagement between the United States and China.

Looking forward, the sustainability of this market optimism will largely depend on the evolution of US-China trade negotiations during and beyond the 90-day reduction period. While the current rally reflects positive sentiment, the long-term impact on tech stocks and broader economic growth will be determined by both nations’ commitment to maintaining cooperative trade policies.

This development marks a potential turning point in international trade relations, with implications extending far beyond the technology sector. The success of this temporary measure could pave the way for more comprehensive trade agreements, potentially reshaping global economic dynamics in the years ahead.

News Source: CNBC