May 12, 2025

The Pulse: Global Economic and Market News for Monday, May 12, 2025

Global Economic and Market News: May 12, 2025

Global markets soared on May 12, 2025, after the United States and China announced a significant, though temporary, reduction in tariffs following breakthrough negotiations in Switzerland. This development sparked a powerful rally across equities, especially in technology and consumer discretionary sectors, while also impacting currency, bond, and commodity markets.

U.S.–China Tariff Truce: A Beacon of Hope

• The S&P 500 surged 3.26% to 5,844.19, the Nasdaq Composite jumped 4.35% to 18,708.34, and the Dow Jones Industrial Average climbed over 1,100 points, or 2.9%124.

• The agreement suspends recent tariff hikes for 90 days: U.S. tariffs on most Chinese imports drop to 30%, while China reduces tariffs on American goods to 10%1246. This rollback exceeded market expectations and reversed much of the uncertainty that had weighed on global trade and investment in recent months.

• The Nasdaq Composite officially entered a new bull market, closing more than 20% above its April 8 low and ending a bear market that began in early April 24.

Sector and Corporate Highlights

• Consumer discretionary stocks led the rally, with Carnival up 10%, Wynn Resorts and Williams-Sonoma up 8%, and Amazon, Tesla, and Apple all rising more than 6%1.

• Technology giants like Meta Platforms and Nvidia gained over 5% and 4%, respectively, while retailers Best Buy and Five Below posted double-digit gains1.

• Pharmaceutical stocks rebounded after a new executive order on drug prices was seen as less severe than feared, with Merck, Pfizer, Bristol-Myers Squibb, and Eli Lilly advancing. However, pharmacy benefit managers and some retailers fell on concerns over direct-to-consumer sales provisions1.

• NRG Energy stock soared nearly 20% after announcing a $12 billion acquisition of natural gas assets, positioning itself to meet growing electricity demand from AI data centers and U.S. industrial expansion1.

Macroeconomic and Policy Context

• The tariff reduction represents a 40% decrease in the negative economic impact of all 2025 tariffs to date, according to The Budget Lab at Yale. However, the average effective U.S. tariff rate remains at 17.8%, the highest since the 1930s, and is projected to remain elevated even after accounting for changes in consumer behavior7.

• The latest S&P Global PMI data and tariff trackers show that tariffs have already raised price levels, weakened exports, and dampened business sentiment globally, with inflationary impacts noted in the U.S., Europe, and Asia5.

• U.S. Treasury Secretary Scott Bessent expressed optimism about building a more comprehensive agreement with China in the coming weeks. Still, analysts and economists caution that negotiations will likely be complex and protracted16.

• The Federal Reserve recently held rates steady at 4.25–4.5% and is expected to maintain this stance until the 90-day tariff truce expires in July, as policymakers weigh the inflationary effects of tariffs against slowing growth3.

Global Perspective and Outlook

• The dollar posted its most significant gain in nearly a month, while safe-haven assets like gold and government bonds saw declines as risk appetite returned6.

• Despite the relief rally, investors remain cautious about the truce's durability and the risk of renewed trade tensions. The overall price level from 2025 tariffs has risen by 1.7%, translating to an average annual consumer loss of $2,800 per household, with the lowest-income households hit hardest7.

• S&P Global notes that upcoming U.S. inflation, retail sales, and industrial production data will be closely watched for signs of tariffs affecting economic momentum, with risks of technical recession if GDP falls again in Q235.

Disclosure

This article is for informational purposes only and does not constitute investment advice, an offer to sell, or a solicitation to buy any securities. All information is based on publicly available sources as of May 12, 2025. The author holds no positions in the securities mentioned. Readers should consult financial professionals before making investment decisions.

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The Pulse: Global Economic and Market News for Monday, May 12, 2025

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