US-China Trade War Truce Triggering Rate Cuts?

● US-China Trade War: Plaza Accord 2.0?, Fed Rate Cut Imminent

U.S.-China Tariff War Ceasefire: Why Did the Market Cheer? – A Comprehensive Overview of Background, Impact, and Key Future Issues

The U.S.-China tariff war has entered a 'ceasefire' for now.
This article provides a complete chronological and itemized summary of the joint statement's key points, why both countries had to back down, the changes in the market, and upcoming developments, including exchange rates and interest rates.
Specifically, it covers the behind-the-scenes story of the trade agreement, tariff rate changes, the impact on key items like rare earths and fentanyl, U.S. demands and China's response, and the possibility of a subsequent currency war.

1. The Peak of the Tariff War and the Background of the Joint Statement

– In early April, the U.S. and China exchanged tariff bombs, reaching a peak of uncertainty.
– On the day of the announcement and the actual tariff implementation date, the stock market fluctuated greatly, with investors clearly exiting.
– Subsequently, the market’s perception that “it can’t get any worse” led to increased expectations of easing.
– Immediately after the declaration, global stock markets (KOSPI, KOSDAQ, S&P 500, etc.) rebounded in tandem.
– The fear of the tariff war gradually eased, strengthening the market rally.
– Around the same time, the U.S. also pursued ‘pressure on other countries,’ such as concluding trade negotiations with the U.K.

2. Summary of the U.S.-China Joint Statement and Specific Changes

– Joint Statement Format: A three-paragraph structure (actions by both countries, mutual adjustments, follow-up consultation mechanisms).
– Specific Details:
– Both countries agreed to ‘temporarily suspend’ most of the tariff measures taken thus far.
– China: Reduced tariffs on the U.S. from 125% → 10%.
– U.S.: Reduced tariffs on China from 145% → 30%.
– In other words, a significant reduction of 115%p each. Practically ‘reset’ to pre-tariff war levels.
– Establishment of a Practical Consultation System: The Chinese Vice Premier-U.S. Treasury Secretary-USTR triangular line begins ongoing discussions.
– Establishment of various additional consultation and agreement mechanisms (flexible hosting regardless of third country, U.S., or China).

3. Why Did Both Countries Back Down? (Background Analysis)

– U.S. Economic Situation: According to the IMF report, the growth rate forecast before the trade war plummeted from 2.7% → 1.8% after the war.
– Deterioration of investment sentiment, inflationary pressure, insufficient conditions for interest rate cuts.
– Trump’s lowest approval ratings, political burden such as large-scale protests.
– Chinese Economic Situation: As an export-dependent country, blocking exports to the U.S. lowers the growth rate from 4.6% → 4.0%.
– Difficult to prevent the aftermath despite strong economic stimulus.
– The impact is even greater if indirect exports (Canada, Mexico, etc.) are fundamentally blocked.
– Both sides faced unexpected ‘boomerangs,’ making concessions inevitable due to concerns about a full-blown crisis (economic recession).

4. Which Side Benefited More, the U.S. or China?

– Officially, neither side achieved a complete victory. Both ‘lowered their tails’ to some extent.
– However, while all previous trade negotiations were U.S.-led (held in Washington), this time it took place in Switzerland, a symbol of the WTO and free trade > Symbolic change reflecting China’s position as much as possible.
– Additional practical gains other than tariff reductions (e.g., Boeing purchase commitments during negotiations with the U.K.) are hard to find, remaining at the ‘status quo’ level.

5. The Impact of the Ceasefire on the Actual Market and Economy

– Recovery of global risk asset appetite, sharp rebound in stock markets such as the U.S.’s three major indexes and KOSPI.
– Fall in treasury bond yields (rise in treasury bond prices), reassessment phase of safe assets.
– Moderate strengthening of the dollar index, rise in the won-dollar exchange rate, signs of some international funds returning to the U.S.

6. Future Negotiations and New Issues (Rare Earths, Fentanyl, etc.)

– Rare Earths: China had announced strong export restriction measures, but is pursuing a temporary 90-day suspension following the agreement.
– The U.S. conceded to obtain a ‘deferral’ due to a lack of alternative import channels.
– China participated due to concerns about a decline in domestic factory operating rates.
– Fentanyl: The U.S. demands strong sanctions against China > Legal changes to strengthen drug enforcement are highly likely in the future.
– Included as a key point in the U.S.-China joint statement.

7. U.S. Additional Demands and Trade Restructuring (Import Expansion, Energy-Focused)

– A significant portion of the U.S. trade deficit originates from China (approximately $3 trillion).
– Demands for expanded exports to China and imports by the U.S., as in the past: particularly focused on energy fields such as crude oil and natural gas.
– From China’s perspective, replacing energy imports from other countries with U.S. products can partially resolve the U.S. trade deficit without losses.
– Promotes changes in the global supply chain structure as well.

8. Possibility of Issue Shifting from “Tariff War → Exchange Rate/Currency War”

– As trade negotiations enter a mitigation phase, the U.S. is expected to strengthen ‘exchange rate appreciation pressure’ on various countries.
– Possible in the form of a second Plaza Accord-style pressure.
– Attempts to forcibly raise the dollar’s value and the currency values of counterpart countries.
– Possibility of structural changes in the global financial market.

9. Key Checkpoints Moving Forward – Interest Rates and Economic Indicators

– If the actual trade war eases, expectations for a U.S.-led interest rate cut will resurface.
– Pay attention to Powell and the Fed’s interest rate policy, and the CPI (inflation rate) announcement on May 13.
– If inflationary pressure is low, the likelihood of interest rate cuts to stimulate the economy increases.
– Exchange rates/interest rates are both expected to emerge as important themes in the market.

< Summary >

In the U.S.-China tariff war, both sides chose a ceasefire, unable to bear the economic shock. After significant tariff reductions by both countries, practical negotiations are becoming commonplace. Restructuring movements are emerging in various industries (rare earths, fentanyl, energy, etc.), and global stock markets are strengthening the dollar. Going forward, the currency war and the momentum of a U.S.-led interest rate cut are expected to emerge as key variables.

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U.S.-China Geneva Talks: Tariff Reductions, Establishment of Negotiation Mechanisms, and Changes in the Global Market

Here's a detailed summary of the key contents of this U.S.-China meeting, market interpretations, and remaining risks in chronological order.
Includes tariff reductions by the U.S. and China and a 90-day grace period, stock market reactions, changes in major economic indicators, global economic outlook, and remaining variables.
By understanding this article, you can gain insights into global investment strategies and market trends at a glance.
In particular, we will delve into the background of the stock market surge, key insights, Wall Street reactions, subtle movements of each country's government, the impact on technology stocks, and negotiation risks.
It includes all economic information that must be checked from the perspective of a leading investor.

1. Tariff Reduction News and Key Contents

The United States reduced tariffs on Chinese products from the existing 145% by 115% points.
Only 30% remains, which includes the basic tariff of 10% plus an additional 20% for the fentanyl issue.
China also significantly lowered tariffs from 125% to 10%.
Both countries have formalized their position that they do not want direct supply chain decoupling.
Tariff reductions were the result of both delegations aiming to ease tensions and achieve trade balance.
Thanks to this, the global economic outlook and trade conditions are likely to change more positively in the future.

2. Grace Period and Possibility of Renegotiation

The tariff reduction measures have a 90-day grace period.
If no further progress is made within 90 days, the U.S. could revive tariffs to 30%+24%=54%, and China to 10%+24%=34%.
However, discussions on positive follow-up procedures such as establishing a working group for practical consultations and signing a memorandum of understanding were also announced.
Both China and the U.S. expressed their willingness to make renegotiations successful.
In reality, they unanimously voiced the need to maintain a stable global supply chain rather than decoupling.
The establishment of a negotiation mechanism plays a major role in increasing market confidence.

3. Stock Market and Financial Market Reactions

Global stock markets, especially technology stocks, surged on the news of tariff reductions.
The fear index (VIX) fell below 20, significantly improving investor sentiment.
Major investment banks such as JP Morgan and Wedbush diagnosed "easing concerns about a short-term recession and thawing of the trade war."
The probability of a recession in Polymarket also plummeted from 60% to the 40% range.
China's economic growth forecast was revised upward from the existing 4.1% to 4.8%.
In particular, expectations for the stock prices of leading Chinese tech companies such as Alibaba and JD.com are growing.
Market volatility, growth momentum, and technology stock outlooks are all in sync.

4. Remaining Variables and Risk Factors

The possibility of tariff revival remains if negotiations break down after the 90-day grace period.
Some investment banks such as ING have raised cautious arguments, saying, "Tariff exemptions are temporary measures, not a fundamental solution."
If U.S. consumer goods companies import large quantities of Chinese products due to tariff exemptions, the trade deficit with China could expand again.
China has also avoided demands for structural concessions, so although short-term risks have been resolved, the possibility of a medium- to long-term stalemate remains.
The market is paying close attention to symbolic "signals" such as telephone calls between the leaders of the U.S. and China.

5. China’s Position and Subtle Signals

Public opinion management and political burden are clear in China.
A movie symbolizing the restoration of U.S.-China relations was scheduled to be shown on China CCTV,
However, cautious movements were shown, such as sudden cancellation of programming and blocking on social media.
This suggests that the negotiations are not completely over yet.
It shows that diplomatic sensitivity is revealed even within China, suggesting that various variables exist.
Therefore, the market is maintaining caution along with positive expectations.

6. Strategic Points for the Future

Currently, the stock market is strengthening positive momentum and growth expectations.
Global supply chain stability, a decrease in the probability of recession, and increased expectations for technology stock strength are expected due to tariff reduction benefits.
However, it is necessary to monitor the negotiation results during the 90-day grace period.
It is essential to check the level of long-term trade agreements and additional structural reforms.
Real-time monitoring of AI and automation trends and market volatility is more important than before.
Economic experts and investors must have rapid information updates and flexible responses.

< Summary >
U.S.-China tariff reductions and 90-day grace period, global stock market rebound, improved investor sentiment,
Momentum for major investments such as technology stocks, remaining negotiation risks and caution in China, etc.
Summarizes the key points of the future global economic outlook.

SEO Summary

The U.S.-China trade negotiations, which were the biggest issue in the global economic outlook, reached a turning point through the Geneva talks.
The U.S. and China both significantly reduced tariffs and granted a 90-day grace period, stabilizing the supply chain and rebounding the stock market.
The stock market, especially technology stocks, showed a remarkable rise, leading to improved investor sentiment and reduced probability of recession.
Economic experts are still paying attention to the variables of renegotiation after the 90-day grace period and subtle signals in China, and emphasize the need for structural trade agreements.
It is the latest economic issue that contains all the best economic keywords such as AI-based market analysis, global supply chain, trade war, growth rate outlook, and stock market volatility.

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