by Daniel Brouse
May 12, 2025
A much-publicized “trade deal” between the United States and China was announced over the weekend, sparking an immediate rally in the futures markets. Investors initially interpreted the announcement as a sign of easing tensions between the world’s two largest economies. However, a closer look reveals the agreement is far more limited in scope than the headlines suggest.
In contrast, the bond market remains notably cautious, showing little of the exuberance seen in equities. Interest rates have stayed elevated, reflecting persistent concerns about inflation, fiscal sustainability, and geopolitical instability. Bond investors appear unconvinced that the 90-day tariff pause will yield meaningful or lasting economic relief. The continued pressure in yields signals expectations of ongoing volatility and fiscal strain—deepening the divide between short-term market sentiment and long-term economic fundamentals.
Rather than a sweeping resolution, the deal amounts to a 90-day pause on the implementation of the full 145% tariff rate previously threatened by the U.S. administration. During this temporary window, tariffs remain at historically high levels: a 30% rate on all goods, 50% on most goods, and more than 100% on electric vehicles (EVs) imported from China. While slightly less draconian than a full embargo, these rates still represent one of the largest tax burdens on American consumers and businesses in modern history.
While the temporary easing may seem like progress, these levels still represent some of the most protectionist policies in modern U.S. history, and they function as a substantial tax burden on American consumers and businesses. For context, even the lowest of these rates—30%—is far above the average U.S. import tariff of recent decades, and for many product categories, the costs are being passed directly onto end users.
Economists warn that calling this a “deal” may be misleading. It is more accurately described as a ceasefire, not a resolution. Without structural changes to tariff policy or a rollback of these rates, the economic drag from higher input costs and reduced trade efficiency will persist. Small and mid-sized businesses, in particular, are expected to bear the brunt of these taxes, while consumers face higher prices on everything from electronics to everyday household goods.
Unless further progress is made, this 90-day pause may merely delay—not avoid—the full brunt of a trade war whose costs are already being felt. Any sustainable improvement will require deeper policy shifts, not temporary reprieves wrapped in celebratory headlines.