Market Update May 12, 2025 – – Tariff Progress with China

It’s a bullish day for a Market Update. Weekend tariff talks sent stocks surging higher. Today’s news is similar to the April 9 announcement of a tariff pause.

Today’s strong move up in the stock market was a solid blow to the bears. The bullish market action was telegraphed overnight, as the futures market indicated a higher open after positive tariff developments were made between the U.S and China. Stocks rallied furiously after Treasury Secretary Scott Bessent made progress with Chinese counterparts during key trade talks in Geneva, Switzerland, over the weekend. The Dow Jones Industrial Average and other major stock indexes opened higher and surged today after President Donald Trump and the U.S. reached a trade deal with China to slash tariff rates resulting in a 90-day tariff reduction agreement. The U.S. and China will temporarily slash tariff rates on each other in a dramatic de-escalation of a trade war between the world’s two largest economies. The U.S. will cut the 145% tariff on most Chinese imports to 30% by May 14, including a 20% tariff tied to fentanyl. China will cut its 125% tariff on U.S. goods to 10%. The U.S. tariff cuts don’t apply to Trump’s sectoral duties on steel, aluminum and more. President Donald Trump struck an enthusiastic tone following the trade progress made with China over the weekend, saying a “total reset” in relations has been achieved. He also said that the “best part of the deal” is that the communist country had “agreed to open itself up to American business.”

The table below shows today’s market moves.

The more the president talked, the more the market gained. China will not just reduce tariffs, Trump said, but also agreed to “suspend and remove all of its non-monetary barriers” on trade. Trump also teased potential direct contact with counterpart Xi Jinping. He said he will talk to the Chinese president “maybe at the end of the week.” The president also said he does not expect tariffs on Chinese imports to return to the 145% level following the conclusion of the 90-day pause.

In additional trade talk, Trump targeted big pharma. Pharmaceutical stocks battled back after President Trump signed an executive order to reduce the amount the government pays for drugs. They will in the future be tied to lower prices abroad. “We are going to pay the lowest price there is in the world,” Trump said during his Monday media conference. “We will get whoever is paying the lowest price, that’s the price that we’re going to get.” In a Truth Social post earlier in the day Trump claimed this could cut the cost of prescription drugs “almost immediately, by 30% to 80%.” During his morning appearance he added they could fall by as much as 90%. The exact details of which drugs will be affected have yet to emerge.

The U.S. stock market has made investors feel like they were on a wild roller-coaster ride since the end of last year. Extreme news-drive volatility has scared many stock holders out of the market as investor sentiment reached levels of pessimism not seen since the bearish market during the Covid crash. Like we experienced with the 2020 bear market, a V-shaped recovery quickly ensued. This time the bulls are charging on tariff news indicating agreements can be reached and the level of trade war uncertainty is less uncertain.

Hope this was helpful.

John