US–China Tariff Truce Extended: 90-Day Freeze Calms Markets Before CPI Data

US–China Tariff Truce Extended

In a move that has quickly become the focal point of global market discussion, President Donald Trump has signed an executive order extending the existing tariff freeze on Chinese imports for an additional 90 days. Confirmed by both the White House and China’s Ministry of Commerce, this extension delays a potential tariff hike, one that could have raised duties on certain Chinese goods to as much as 145%. The decision is being hailed as a temporary reprieve for global trade flows, particularly as investors brace for critical U.S. inflation data later today.

This US China tariff news carries weight far beyond Washington and Beijing. By granting negotiators additional time, it provides short-term relief to supply chains already under pressure from geopolitical uncertainty and fluctuating demand. The announcement also underscores how intertwined trade policy and monetary policy have become, with both capable of influencing risk appetite and cross-border capital flows almost instantly.

Economic Impact

The 90-day extension halts what could have been one of the most significant tariff escalations in recent years. A hike to 145% on certain goods would have directly impacted an estimated $300 billion worth of trade between the two nations. According to Reuters’ latest coverage of the tariff decision, economists are already revising short-term growth forecasts upward for several Asian export economies, noting that the immediate risk of supply chain disruption has been averted.

From a macroeconomic standpoint, this development influences more than just bilateral trade. Global manufacturing indices have been trending lower in recent months, with the J.P. Morgan Global Manufacturing PMI slipping to 48.9 in July, a contraction signal. The truce is expected to stabilize orders for components and raw materials, particularly in electronics, machinery, and industrial metals.

Longer term, the decision could help prevent a cascading slowdown in trade finance and logistics, sectors that are highly sensitive to geopolitical uncertainty. While this does not remove the structural tensions between the U.S. and China, it does provide breathing space for businesses to plan shipments, hedge currency exposure, and manage working capital more effectively.

Market Response

Financial markets reacted swiftly but cautiously. Equity indices across Asia opened higher, with Hong Kong’s Hang Seng gaining 1.2% and the Nikkei 225 up 0.9% in early trade. In the U.S. futures market, S&P 500 contracts rose 0.4% before paring gains, reflecting a balanced mix of relief and anticipation ahead of the Consumer Price Index release.

In foreign exchange, the USD/CNH pair dipped 0.3% as the offshore yuan strengthened, a sign of reduced trade risk premiums. The Japanese yen, a classic safe-haven currency, softened marginally, suggesting traders were unwinding some defensive positioning. Commodity currencies such as the Australian and New Zealand dollars saw modest gains, benefiting from the perception that Asian demand may hold steady.

Interestingly, the bond market showed a muted reaction, with U.S. 10-year Treasury yields moving just 2 basis points higher. This indicates that while equities and FX markets welcomed the news, fixed-income investors are still awaiting confirmation from inflation data before adjusting positions significantly.

Technical and Fundamental Analysis

From a technical perspective, USD/CNH has been in a consolidation range between 7.18 and 7.25 over the past three weeks. The tariff extension announcement triggered a test of support at 7.20, which, if breached, could open the way toward 7.18 and potentially 7.15 in the near term. Conversely, a rebound above 7.24 would signal that the broader trend remains in favor of the dollar.

Fundamentally, the yuan’s reaction is tied not only to trade headlines but also to the People’s Bank of China’s (PBoC) monetary stance. With the PBoC expected to maintain a steady policy rate in its next meeting, any improvement in trade outlook could give the yuan a modest upside bias. For the dollar, the upcoming CPI report will play a crucial role in determining whether the Fed leans toward an earlier rate cut or maintains its current policy stance.

Equity markets also reflect a nuanced picture. The S&P 500’s daily chart reveals a bullish pennant pattern forming near record highs. If CPI data comes in cooler than expected, the combination of eased trade tensions and potential Federal Reserve rate cuts could push the index into uncharted territory. Conversely, a hotter CPI could reintroduce volatility, undoing some of the short-term optimism sparked by the US China tariff news.

Expert Opinions

According to Investopedia’s report on the US China tariff truce, senior analysts believe this extension was “a calculated move to avoid simultaneous market shocks from tariffs and inflation data.” They point out that the timing, just hours before the CPI release, was deliberate to calm investor sentiment and avoid excessive volatility.

Michael Every, global strategist at Rabobank, remarked in an interview with Bloomberg that “while the tariff truce is welcome, it is a mere postponement of inevitable friction. Traders should treat it as a reprieve, not a resolution.” This perspective suggests that risk managers and corporate treasurers should avoid complacency, using the window to secure supply chain resilience.

Similarly, HSBC’s chief economist for Asia-Pacific noted that this period could allow exporters to accelerate shipments before any renewed escalation, thereby front-loading trade volumes in Q3. This tactical advantage could prove vital for companies seeking to lock in orders before the holiday season, especially given the uncertain backdrop in global demand.

Strategic Implications for the Next 90 Days

This US China tariff news represents a critical, if temporary, easing of geopolitical tensions. While it reduces the immediate risk of severe tariff hikes, the underlying issues, intellectual property disputes, technology transfer rules, and market access, remain unresolved. For traders, the 90-day window offers opportunities but also calls for vigilance, especially as the Federal Reserve’s policy path and China’s domestic stimulus measures will interact with trade developments.

Looking ahead, the expiration of this truce will coincide with the year-end holiday trade cycle, a period historically marked by heightened logistics activity and currency volatility. Market participants should therefore prepare for renewed negotiations, or potential confrontations, by diversifying exposure, maintaining liquidity buffers, and closely tracking both U.S. and Chinese policy announcements.

In short, while today’s development has bought the global economy some time, it has not eliminated the fundamental tensions that have defined U.S.–China trade relations for over a decade. Strategic positioning and disciplined risk management will remain paramount as the 90-day clock ticks down.