A temporary tariff truce between the United States and China sent stocks soaring on Monday. However, strategists say levies that remain higher than they were at the start of the year still pose a threat to growth. At the same time, the uncertain path to a lasting agreement means more market volatility could be on the horizon.
Following talks in Switzerland over the weekend, the two countries reached a deal that would reduce US tariffs on Chinese goods to 30% and Chinese tariffs on US goods to 10%. Last week, a 145% US tariff on Chinese goods and a 125% Chinese tariff on US goods was threatening to bring trade between the two economic powerhouses to a standstill.
The scaled-back tariffs took markets by surprise, with the Morningstar US Market Index rising 3.3% on Monday. “The reduction in tariffs by both countries is more than what we were looking for,” says Paul Christopher, head of global investment strategy at the Wells Fargo Investment Institute. He characterizes Monday’s market action as a relief rally.
This post originally appeared at Morningstar.