Wall Street stocks rally as US-China trade war cools

Wall Street stocks have rallied as traders welcome the US and China slashing tariff rates for 90 days following weeks of an escalating trade war.

Top indexes in New York rebounded when markets opened on Monday, joining peers in Europe that have been making gains.

The S&P 500, which tracks the country’s leading listed companies, was soaring by about 2.7% in early trading, bringing the index to a five-week high.

Dow Jones was climbing about 2.4%. The technology-focused Nasdaq was seeing the biggest gains, moving about 3.5% higher on Monday.

The US and China have agreed to cut tariff rates on each other’s goods for a 90-day period, representing a significant de-escalating of trade tensions which had ramped up between them in recent weeks.

US trade representative Jamieson Greer said both countries had agreed to cut their rates by 115% for the period.

This brings down US tariffs on Chinese exports from 145% to 30%, and China’s tariffs on US exports down from 125% to 10%, for the period.

The update signals a significant easing of trade pressure between the world’s two largest economies, even though the levy on Chinese goods remains higher than the 10% “baseline” rate imposed by US President Donald Trump.

Russ Mould, investment director at AJ Bell, said: “While the trade spat has only been dialled back for 90 days, it’s a major breakthrough as far as investors are concerned.

“Some people thought the best-case outcome from the weekend’s discussions would be an agreement to simply keep talks going.

“Therefore, to have reached an initial deal so quickly and one that rolls back tariffs by a large amount is a pleasant surprise.

“The next 90 days are going to be crucial in determining the longer-term tariff levels between the two countries. ”

European stocks were boosted following the announcement. France’s Cac 40 was soaring about 1.3% on Monday, while the UK’s FTSE 100 was up about 0.2%, with mining giants dragging on the index.

The agreement follows the UK Government’s announcement of its own trade deal, as talks continue in a bid to limit the impact of Mr Trump’s “liberation day” policies announced last month.

A new UK-US agreement, announced on Thursday, saw tariffs cut on steel and car exports, which were threatened by higher rates.

The deal was viewed by many economists as a political success, but that will do little to boost the economy, with most UK exports to the US still subject to a blanket 10% tariff.

The market reaction was therefore muted, with the FTSE 100 ending its record run of consecutive gains last week.

Lynn Song, chief economist for China at ING, said: “These rates return tariffs to pre-Liberation Day levels and represent a better-than-expected de-escalation.

“Although the de-escalation of the trade war benefits both economies, the agreement, which significantly lowers tariffs without any concessions, is likely to be viewed as a particular victory for China.

“China had previously demanded a reduction in tariffs before negotiations, and this now seems to have been achieved.”

ING said it was expecting China’s export levels to “bounce back sharply” this month and next “as importers with depleted inventories will take advantage of the ceasefire to resume imports”.

The dollar was surging after the announcement, with the pound down by about 0.4% against the currency, at 1.321, on Monday.

The price of oil also rocketed by about 3.3%, to 66 US dollars per barrel, amid hopes of stronger global energy demand.