Global markets rally as US-China slash tariffs and Trump targets drug prices
Global financial markets surged on Monday following the surprise announcement of a temporary truce between the US and China, with both sides agreeing to sharply reduce tariffs over the next three months. This breakthrough eased fears of a full decoupling, sent equity markets sharply higher, and triggered a global shift in sentiment toward risk assets.
However, another policy shift rattled a different sector: President Trump’s vow to slash US drug prices. His aggressive tone on pharmaceutical pricing pressured healthcare stocks, partially offsetting broader market gains.
US-China tariff truce sparks risk-on sentiment
After high-level talks in Geneva, the US and China agreed to:
- Cut US tariffs on Chinese goods from a combined 145% to 30%, effective May 14
- Reduce Chinese tariffs on US imports from 125% to 10%
This 90-day cooling-off period allows both countries to:
- Resume structured negotiations
- Explore purchase agreements to reduce the US trade deficit
- Avoid immediate re-escalation
Washington stressed that while broader tariffs remain on other trading partners, this bilateral easing offers a pathway to more balanced trade. Officials also floated the potential of extending the truce beyond the summer if “good faith engagement” continues.
Market reaction
- S&P 500 futures surged 3%, poised to reclaim highs from before the April tariff escalation
- Nasdaq 100 futures rose 8%, with Apple, Nvidia, and Tesla jumping 5%+ in early trading
- Safe-haven assets retreated: gold, yen, and Swiss franc all declined
- Euro fell as much as 1.5%, marking its worst day of 2025 so far
Investors trimmed expectations for aggressive Fed rate cuts. Swaps markets now price in a quarter-point cut in September, instead of July.
Trump targets prescription drug prices, pharma stocks drop
In a bold policy move, President Trump announced plans to reduce US prescription drug costs by “59%, PLUS!”, pushing for a “most-favored-nation” pricing model where Americans pay no more than citizens in countries with the lowest drug prices.
- Trump promised to sign an executive order enforcing the pricing shift
- The policy is expected to trigger 30–80% price cuts, though no implementation details were provided
Market impact
- US pharmaceutical stocks fell sharply pre-market:
- Pfizer, Eli Lilly, Merck, Bristol-Myers all down
- European firms like Sanofi, Novo Nordisk, and AstraZeneca also declined
- Japan’s Topix pharma sub-index posted its worst daily drop since August
The move reignited fears of earnings compression across the sector, particularly for drugs covered under Medicare and Medicaid, which together account for about 40% of US drug sales.
Global context and trade dynamics
Markets interpreted the tariff easing as a pivotal moment in preventing full economic decoupling. Yet risks remain:
- History offers caution: a similar 2018 “pause” in trade tensions broke down, leading to more tariffs and prolonged talks
- China’s removal of non-tariff barriers—such as rare earth export restrictions—is seen as a concession but also a sign of strategic recalibration
- Logistics firms anticipate a short-term shipping surge as Chinese exporters rush goods westward during the truce window
Despite the optimism, market participants note that the underlying trade imbalances and geopolitical competition remain unresolved.
Markets welcomed the US-China tariff rollback as a major de-escalation with the potential to restore trade stability—at least temporarily. The pharmaceutical sector, however, faces renewed political pressure and pricing uncertainty after Trump’s drug pricing remarks. Investors are now navigating a world where macro policy is moving markets more than earnings, and where diplomacy, not just data, is setting the tone.
Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.
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