China and the US have reported “significant progress” following two days of trade discussions in Switzerland. The two countries just agreed to cut their bilateral tariffs by 115% for a 90-day period on May 12, 2025. US exports to China will see tariffs reduced from 125% to 10%, while tariffs on Chinese exports to the US will be reduced from 145% to 30%.

The latest tariff cuts roll back tariffs to levels seen years ago. Chinese tariffs on US exports were around 21% from 2020 to 2024, while US tariffs on Chinese exports hovered around 19%.

“The magnitude of this tariff reduction is larger than expected,” says Tai Hui, J.P. Morgan Asset Management’s Asia-Pacific chief market strategist. “It reflects both sides recognizing the economic reality that tariffs hinder global growth and that negotiation is a better path forward.

“While the 90-day period may not be sufficient for the two sides to reach a detailed agreement, it keeps the pressure on the negotiation process. We are still awaiting further details on other terms of the agreement, such as whether China will ease restrictions on rare earth exports.”

The Hang Seng Index rose by 3%, and the Hang Seng Tech index increased by over 5% as of close on Monday. “The immediate market reaction has been positive, with Hong Kong stock indices and US equity futures both rising, alongside UST [US treasury] yields and the USD index,” Hui adds. “Overall, we expect markets to shift back to a risk-on sentiment in the near term. Pressure on the Fed [US Federal Reserve] to cut rates may also ease for the time being.”