The U.S. dollar surged to a one-month high on Monday after Washington and Beijing announced an unexpected tariff truce, offering temporary relief to markets battered by trade war fears. The agreement marks the first major de-escalation in months—but is it just a pause in the economic showdown?
Breaking Down the Deal
In a sharp reversal from April’s aggressive tariffs, the two superpowers agreed to:
- U.S. cuts: Tariffs on Chinese goods drop from 145% to 30%
- China’s move: Duties on U.S. imports fall from 125% to 10%
- Market reaction: The dollar index jumped 1%, while safe-haven currencies like the yen and Swiss franc tumbled.
“This isn’t a peace treaty—it’s a timeout,” warns Kenneth Broux, Société Générale strategist. “But for businesses caught in the crossfire, even a temporary ceasefire is welcome.”
Market Fallout: Winners and Losers
- Euro & Pound: The euro crashed 1.3%—its worst day of 2025—while sterling dropped 1%.
- Yuan Surge: China’s currency hit a 6-month high, a symbolic win for Beijing.
- Safe Havens Bleed: The yen fell 2%, and the Swiss franc slid 1.7% as traders ditched defensive bets.
Also Read US and China Agree to Pause Tariffs for 90 Days; Big Cuts on Both Sides
The Fine Print
- China’s Victory Lap: “This deal favors Beijing politically,” says ING’s Lynn Song. “They’ve avoided maximum pain while keeping concessions minimal.”
- Fed’s Next Move: This week’s U.S. inflation and retail data could determine whether the dollar rally continues.
What’s Next?
This Week’s Tests:
- Tuesday: U.S. CPI inflation report
- Thursday: April retail sales data
- Friday: Fed Chair Powell’s speech
Behind the Scenes: Analysts suspect the truce is a tactical pause before November’s U.S. election. “Trump wants to calm markets, but the structural issues remain,” notes AFS Group’s Petimezas.
The Bottom Line
This truce is like hitting snooze on a 5 AM alarm—it buys time, but the hard choices aren’t going away. For now, though, consumers and investors can enjoy the breather.
Pro Tip: Watch China’s export data next month. If their trade surplus balloons again, the tariff fight could reignite faster than a TikTok trend.
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