The recent 90-day trade truce between the United States and China has offered a brief pause in an otherwise protracted and disruptive chapter for global trade. The agreement includes a significant rollback of tariffs: Washington agreed to reduce duties on Chinese imports from an average of 145 percent to 30 percent, while Beijing responded by lowering its own tariffs on American goods to 10 percent. Additionally, China has agreed to suspend several non-tariff measures introduced after April 2, including export restrictions on critical raw materials such as rare earths –inputs vital to high-tech manufacturing and electric vehicle production. These developments represent a measured de-escalation in tensions between the world’s two largest economies. While the tone of negotiations has turned more constructive, the long-term direction of trade policy between the two nations remains uncertain. Much depends on whether both parties can translate temporary goodwill into durable agreements, especially in sectors like technology, energy, and industrial manufacturing, where strategic rivalry is deeply embedded.
Although markets initially welcomed the truce, optimism remains tempered by the temporary nature of the agreement and the absence of enforceable mechanisms. The Geneva agreement last weekend, which formalised the 90-day suspension of reciprocal tariffs, triggered a rally across global equities. One notable reaction was in volatility metrics: the CBOE Volatility Index (VIX), often referred to as the "fear gauge" for equity markets, fell sharply by 17 percent to 18.2, reversing the heightened risk sentiment that had prevailed since April. For context, the VIX had spiked to 65.73 in August 2024 amid recession concerns tied to weak labour market data, nearly matching its Covid-era peak. At its extreme during the 2008 global financial crisis, the index reached 89.5. In recent months, the index hovered around 60 due to heightened uncertainty over tariffs and multilateral trade discussions. As volatility subsided, the US Dollar Index began to firm again, reflecting renewed investor confidence. Concurrently, crude oil prices rose modestly on risk-on sentiment, while gold – typically a safe-haven during market turmoil – experienced sharp losses, underscoring the market’s pivot back towards risk assets.
Stock markets across the globe reacted favourably to the developments, with benchmark indices in Asia and North America posting strong gains on Monday. In the United States, the S&P 500 has rebounded by over 22 percent from its early April low, when the initial tariff announcement had erased billions in market capitalisation. The index has now recovered all ground lost since the White House's "Liberation Day" declaration on April 2. In Asia, markets responded with even more enthusiasm. The Hang Seng Index in Hong Kong climbed 2.98 percent, closing at 23,549.46 – its highest in nearly two months – while the Hang Seng Tech Index rose by over 5 percent. Mainland China’s CSI 300 advanced by 1.16 percent to 3,890.60, and Japanese markets also followed suit, with the Nikkei 225 and the broader Topix gaining 0.38 percent and 0.31 percent respectively. South Korea’s Kospi added 1.17 percent, with smaller gains observed in the Kosdaq. Indian equities saw a parallel rally, buoyed by geopolitical relief following a ceasefire announcement between India and Pakistan. However, the end of the week saw Asian markets retreat into a holding pattern, reflecting weaker-than-expected GDP data in Japan and selling pressure in Chinese tech giants such as Alibaba, which weighed on Hong Kong indices.
On the currency front, the dollar remained broadly firm over the course of the week, although it experienced some fluctuations driven by soft economic data and shifting rate cut expectations. Treasury yields declined after a string of disappointing macroeconomic indicators, fuelling market speculation that the Federal Reserve may resume a more accommodative policy stance. Nonetheless, the US dollar continued to outperform the euro, registering its fourth straight weekly gain since the sharp depreciation that followed the April tariff announcement. Meanwhile, gold prices slumped sharply, notching their steepest weekly loss in six months. The combination of a stronger dollar, improved market sentiment, and the US-China trade truce significantly reduced the appeal of gold as a safe-haven investment.
Commodity markets painted a mixed picture. Iron ore futures fell on Friday as traders expressed caution over near-term demand prospects, though overall prices managed to end the week in positive territory. Market sentiment was boosted by expectations that the easing of trade tensions might trigger a wave of advance steel shipments before the end of the truce. Analysts anticipate that mills, still enjoying healthy profit margins, will maintain high production levels through May and June. Copper prices, by contrast, pulled back for a second consecutive session as waning Chinese demand weighed on the market. Oil prices edged higher for the week, helped by the more constructive US-China backdrop, though upside potential remained capped due to rising output expectations from Iran and the partial rollback of OPEC+ production cuts. Market participants remain focused on the pace of Iranian crude flows to China and the broader implications of resumed nuclear negotiations on global oil balances.
From the perspective of dry bulk shipping, even a temporary easing of trade hostilities between the world’s two largest economies is a welcome development. However, the reaction from the Baltic indices suggests a cautious stance, with market sentiment remaining largely muted. The Capesize segment was the standout performer, closing the week with notable gains at $16,736 per day, driven mainly by improved activity in the Pacific basin later in the week. By contrast, both the Panamax and Handysize sectors remained broadly flat, closing at $9,967 and $10,324 per day, respectively. Within the Panamax segment, regional trends diverged – activity improved in the Atlantic, while the Pacific recorded a decline. Meanwhile, the Supramax segment faced downward pressure, dipping to $11,608 per day – its lowest level since early April – underscoring the segment’s sensitivity to broader market uncertainties.
While the 90-day US-China trade truce has offered temporary relief to markets, the structural uncertainties in global trade remain. For dry bulk shipping, the impact has so far been limited to sentimentdriven gains. Ultimately, sustained growth in seaborne trade will depend on deeper resolution of trade frictions and broader macroeconomic stability.
Data source: Doric