The U.S.-China Trade Truce: Market Relief or Mirage?

For a deal with no new breakthroughs, the latest U.S.-China trade agreement has generated an outsized market response. Stocks soared, shippers scrambled to capitalize, and investors breathed a collective sigh of relief. But scratch beneath the surface and this “deal” — really more of a strategic pause — reveals more fragility than finality. As a recent flood of analysis from the Financial Times, Reuters, Time, and others suggests, the devil is not only in the details, but in the motivations and timing behind the détente.

Markets Love Certainty — Even When It’s Temporary

Markets are not known for their patience. The S&P 500 and Nasdaq jumped over 5% and 7% respectively following the May 2025 announcement that the U.S. and China would reduce tariffs dramatically for 90 days — a stark reversal from the previous spiral of tit-for-tat duties. Investors were clearly eager for any signs of stabilization, as the WSJ noted in its upbeat market roundup. The rally was driven largely by tech stocks and logistics firms, a clear sign that global trade flows — or at least the perception thereof — still move the market.

But perception is not reality, as the Financial Times reminds us. The rollback to 30% U.S. tariffs and 10% Chinese tariffs still leaves both countries far from pre-trade-war norms. And the 90-day window feels less like a new beginning and more like a pre-election timeout. As the FT put it, the deal may “buy time,” but it doesn’t buy resolution.

The Realpolitik of Tariff Diplomacy

President Trump’s decision to retreat from his once-uncompromising tariff policy reeks of political calculus. According to PBS NewsHour and Reuters Breakingviews, the truce may help short-term economic indicators and appease markets, but it comes at a steep cost to credibility. After all, why believe future U.S. threats — or promises — when the message changes so often?

The Daily Beast underscores this uncertainty with remarks from JPMorgan Chase CEO Jamie Dimon, who warns that fluctuating tariff policies are creating stagflationary risks. Meanwhile, U.S. businesses, still licking their wounds from previous trade spats, are increasingly prioritizing supply chain resilience over cost efficiency. Home Depot, for example, is rerouting supply chains not to win under current tariffs, but to survive the next batch.

China’s Quiet Advantage

While the U.S. scrambles to reconcile electoral politics with economic policy, China appears to be playing the long game. Time magazine argues that Beijing benefits from the U.S.’s unpredictability: with American companies mired in doubt, China can position itself as a more stable trading partner for other economies.

However, China’s own economy is no beacon of strength. As the WSJ and Atlantic Council experts point out, it’s wrestling with a struggling property sector and sluggish domestic demand. The tariff pause gives it a short-term export boost, but structural reform remains elusive — and that reform, not tariff relief, is what investors really need to see.

A Pause, Not a Peace

So where does this leave us? According to the Atlantic Council, the agreement is less a reset and more a ceasefire. Experts agree: while it temporarily boosts sentiment and shipping volumes, the deal leaves unresolved nearly every major structural issue — from intellectual property to industrial subsidies — that originally ignited the trade war.

Even the optimistic Imperial Citizenship blog, which frames the deal as a turning point, admits that its durability depends entirely on what happens next. That’s a polite way of saying: enjoy the rally, but don’t count on it lasting.

Conclusion: The Market’s Sugar High

If the market loves clarity, it also has a sweet tooth for stimulus. The U.S.-China trade agreement is the financial equivalent of a sugar rush — welcome in the moment, but unlikely to sustain energy for long. Investors should enjoy the bounce but remain clear-eyed. The structural problems that plagued U.S.-China trade before the truce are still very much alive — they’re just wearing a different suit for 90 days.

In other words, don’t mistake the absence of gunfire for the end of the war.