Positive US-China trade war ceasefire prevents recession/credit event - BofA

Positive US-China trade war ceasefire prevents recession/credit event - BofA

The recent 90-day truce in the US-China trade war has significantly boosted market sentiment, with the Dow leaping 1,100 points and the S&P 500 rallying 3.3% [1]. This pause in tariffs has been a welcome relief for businesses that rely on Chinese imports, expressing both relief and anxiety over the temporary respite [1]. The Bank of America (BofA) has noted that this ceasefire could prevent a potential recession or credit event, as it provides a much-needed breathing space for economic recovery [2].

The truce, which includes a reduction in tariffs, has been seen as a positive step towards de-escalating tensions between the two economic giants. The US and China have agreed to a temporary pause in tariffs, with a 90-day period to work on a more permanent solution [1]. This development has had a positive impact on global markets, with investors viewing it as a sign of progress in the trade negotiations.

The relief in the business community is evident, with many companies that have been negatively affected by the tariffs expressing optimism about the future. However, there is also a sense of uncertainty, as the 90-day period is relatively short and the outcome of the negotiations is still uncertain [1]. The temporary nature of the truce means that businesses will need to remain vigilant and prepare for potential changes in trade policies.

In conclusion, the 90-day truce in the US-China trade war has had a positive impact on the markets, with the Dow and S&P 500 experiencing significant gains. While the truce is a welcome development, businesses and investors should remain cautious and monitor the progress of the negotiations closely. The Bank of America's assessment that this ceasefire could prevent a recession or credit event underscores the importance of this temporary truce in maintaining global economic stability.

References:
[1] https://apnews.com/video/dow-leaps-1100-points-sp-500-rallies-3-3-following-a-90-day-truce-in-the-us-china-trade-war-f7ce383252a5438fbd29d596685061d5
[2] Bank of America (BofA) Financial Analysis, May 13, 2025.