US-China Tariff Truce Eases Market Tensions, Boosts Investor Confidence
A temporary easing of trade tensions between the United States and China has brought relief to global markets. Over the weekend, the two economic giants reached a 90-day agreement during negotiations in Geneva to suspend certain tariffs, triggering a sharp drop in market volatility.
The volatility index (VIX), often referred to as the “fear gauge” for its measurement of fluctuations in the S&P 500, fell by 17% to 18.2—its lowest level since the announcement of steep U.S. tariffs last month. Prior to this agreement, markets had been under pressure due to uncertainty fueled by the escalating trade conflict.
As part of the deal, the U.S. agreed to lower tariffs on Chinese imports from 145% to 30%, while China committed to reducing its tariffs on American goods from 125% to 10%.
President Donald Trump described the agreement as the beginning of a new era in U.S.-China relations, highlighting China’s decision to lift non-monetary trade restrictions.
The VIX had reached as high as 65.73 in August 2024, amid economic recession fears following weak labor data. For context, the index peaked at 89.5 during the global financial crisis of September 2008.
The recent agreement has already made a noticeable impact. Market expert Zafer Ergezen told Anadolu Agency that easing global trade tensions has reduced uncertainty, contributing to a more stable outlook. He also noted that the tariff dispute had been a major factor behind gold reaching record highs week after week.
“With uncertainty decreasing, we saw the U.S. Dollar Index climb again and oil prices rebound, while gold—a typical safe-haven asset—began to decline,” Ergezen explained.
He also noted that although full impacts from ongoing geopolitical developments such as the Ukraine conflict and tensions in the Middle East have yet to materialize, investor sentiment is clearly improving.
International market strategist Ozgur Hatipoglu added that the options market currently shows no signs of additional risk being priced into the S&P 500.
“Two weeks ago, there was widespread selling pressure across U.S. markets, but now we’re seeing a strong shift toward buying. This trend looks likely to continue,” Hatipoglu said.
However, he cautioned that a broad-based rally is not yet confirmed, stating, “We’re waiting to see if gains extend further across more sectors. If that happens, it will affirm the strength of the upward momentum.”
