In a dramatic turnaround, U.S. stock markets surged on May 12, 2025, after the United States and China agreed to a 90-day mutual tariff reduction. The Dow Jones Industrial Average leaped 1,160 points, the S&P 500 climbed 3.3%, and the Nasdaq Composite soared 4.3%, exiting bear market territory.
A Truce That Ignited the Markets
The temporary rollback of tariffs, reducing U.S. duties on Chinese imports from 145% to 30% and China’s tariffs on U.S. goods from 125% to 10%, was hailed as a “best case scenario” by analysts. This de-escalation follows a period of heightened trade tensions marked by the “Liberation Day” tariffs announced by President Trump in April, which had previously rattled global markets.
Tech Titans Lead the Charge
Technology stocks were at the forefront of the rally. The so-called “Magnificent Seven”—including Amazon, Apple, and Nvidia—collectively added over $800 billion in market capitalization. The Nasdaq 100 entered bull market territory, reflecting renewed investor confidence in the tech sector.
Broader Market Impacts
The positive sentiment extended beyond tech. Automakers like Ford and General Motors saw significant gains, recovering from previous losses due to tariff concerns. However, pharmaceutical stocks faced pressure after President Trump announced an executive order aimed at reducing prescription drug prices by up to 80%, impacting companies like Pfizer and Merck.
Investor Sentiment and Outlook
Analysts view the tariff truce as a potential turning point. Goldman Sachs noted that the lower-than-expected tariff levels could bolster global growth prospects. However, caution remains as the 90-day window suggests that the trade dispute is not fully resolved. Investors are advised to stay vigilant, with upcoming inflation data and Federal Reserve commentary likely to influence market direction.
