How Solid is the U.S. and China Trade Agreement?
After erasing 2025 losses, stock markets may waver from their strong rally enjoyed in the last month. Japan’s Nikkei 225 and South Korea’s Kospi showed weakness in overseas trade. Hong Kong’s Hang Seng index also pulled back.
Investors may start to price in the risk associated with the temporary tariff relief between the U.S. and China. The tariff pause is in place for only 90 days. The two countries must show signs that the tariff rates will not change when the 90-day pause ends. Otherwise, it will disrupt the supply chain, sellers, and buyer behavior.
For now, shipping volumes may surge as retailers stock up on Chinese goods. That way, they may know the price they are paying before tariffs change.
Investors will watch Walmart (WMT) and Costco (COST). Both firms trade at a rich premium. Walmart should give insight into its pricing strategy concerning tariffs. Later this month, when Costco posts results, it may do the same.
Your Takeaway
The current trade agreement is only a temporary suspension of previous tariff rates. The 30% U.S. tariff on China may change later this summer. Similarly, China will revise its 10% tariff on the U.S. in response.
Fortunately, the two countries are opening a dialogue to discuss trade. That should lower the risk of a price shock resulting from triple-digit percentage tariff rates.
