On May 12, 2025, global financial markets experienced a significant uplift following a landmark agreement between the United States and China to reduce reciprocal tariffs by 115 percentage points for a 90-day period. This de-escalation in trade tensions led to substantial gains across major U.S. stock indices: the Dow Jones Industrial Average surged by over 1,000 points (2.6%), the S&P 500 increased by 3%, and the Nasdaq Composite rose by 4.1% .
Investor sentiment was further buoyed by the rollback of U.S. tariffs on Chinese goods from 145% to 30%, and China’s reduction of tariffs on U.S. goods from 125% to 10% . Analysts view this development as a positive step towards stabilizing global trade relations, potentially paving the way for record highs in technology stocks and broader markets in 2025 .
The ripple effect of this agreement was felt in India, where the Sensex climbed by 3.7%, reflecting renewed investor confidence . However, the Economic Survey 2025 cautions that elevated valuations and optimistic market sentiments in the U.S. raise the likelihood of a meaningful market correction, which could have a cascading effect on India, especially given the increased participation of young, relatively new retail investors .
As markets open today, May 13, 2025, investors will closely monitor the sustainability of this rally and its implications for global economic stability.
