Treasury yields rally after U.S.-China tariff agreement

U.S. Treasury yields edged higher on Monday after the U.S. and China agreed to slash tariffs on each other’s goods, which investors welcomed. The 10-year Treasury yield rose nearly eight basis points to 4.433% at 6:42 a.m. ET, the 2-year Treasury yield soared more than nine basis points to 4.006%.

The market is also bracing for a batch of economic data this week, showing how trade tensions have impacted the economy since U.S. President Donald Trump implemented reciprocal tariffs on global trade partners in early April.

Investors are waiting for April’s consumer price index reading, which is due on Tuesday morning, and the producer price index and retail sales data on Thursday.

Treasury yields soar as U.S. and China reach trade agreement

The 10-year Treasury yield climbed nearly eight basis points on May 12 to 4.433%, while the 2-year Treasury yield added more than nine basis points to 4.006%. Investors seemed pleased as the yields rose following the U.S. and China’s agreement to cut tariffs on each other’s goods.

On Monday, the two countries with the largest economies globally announced they negotiated a deal to lower tariffs, with the suspension of most levies implemented on each other’s imports. The U.S. had previously imposed 145% tariffs on China, while China implemented 125% levies on U.S. goods.

After the negotiations, the deal showed that both countries agreed to lower tariffs from 125% to 10%. The deal also noted that the U.S.’s 20% levies on Chinese imports relating to fentanyl remain unchanged, bringing total tariffs on China to 30%.

“We had very productive talks and I believe that the venue, here in Lake Geneva, added great equanimity to what was a very positive process.”

–Scott Bessent, U.S. Treasury Secretary.

Bessent acknowledged that both countries have reached an agreement on a 90-day pause to lower tariffs. He noted that both sides of the reciprocal tariffs will lower their tariffs by 115%. The pause is set to begin on Wednesday, and both countries say they will continue discussing economic and trade policy.

Chief Asia economist at Capital Economics, Mark Williams, sees the trade war truce as a “substantial de-escalation.” He argued that the U.S. still had much higher tariffs on China than others. Williams also noted that the U.S. appeared to be trying to rally other countries to introduce restrictions on trade with China. Considering those circumstances, The Economist believes there is no guarantee that the 90-day truce will give way to a lasting ceasefire. 

Tai Hui, APAC chief market strategist at J.P. Morgan Asset Management, noted that the magnitude of the U.S.-China tariff reduction was larger than expected. In a research note, he argued that the large magnitude reflected both sides recognizing the economic reality that tariffs will hit global growth and that negotiation was a better option moving forward.

Hui also believes that the 90-day period may not be sufficient for the two sides to reach a detailed agreement, adding that it keeps the pressure on the negotiation process. He also said that investors were still waiting for further details on other trader terms, such as whether China would relax rare earth export restrictions.

U.S. stock futures surge on news of deal

#BREAKING: U.S. stock futures opened sharply higher Sunday evening after the White House announced a trade deal with China had been reached following high-level meetings in Geneva this weekend. Details of the trade deal have not been released. pic.twitter.com/EvQfMozPj0

— Nilesh Rohilla (@nilesh_rohilla) May 11, 2025

Since returning to the White House, U.S. President Donald Trump has launched a flurry of aggressive trade policies that have caused tensions in financial markets and heightened recession fears. Investors were buoyed by news of trade agreements between both nations. 

Nasdaq was up 3.7%, with S&P 500 futures gaining 2.7% and Dow Jones increasing by more than 840 points, or 2%. The ICE U.S. Dollar Index, which measures the U.S. dollar against a basket of global currencies, also rose by 1.1% to 101.46.

Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now