US-China just went from trade war to trade truce 🕊️

This is the second big tariff deal so far – the UK got that honor a few days earlier. Select British products were granted exceptions from US tariffs, but the majority of UK exports will still carry a tax of 10%.

What we’ve seen is a signal to trade partners warming up for their own negotiations: concessions may be made, but some sort of fee will probably stick

The real economic effects of these on-again, off-again levies will take weeks, if not months, to show up in shipping volumes, corporate earnings reports, and inflation data.

In addition, the 90-day truce may not last long enough for a larger solution, meaning there could be another round of whiplash in three months.

Still, these are positive steps – investors welcomed the news with a 3% jump for the S&P 500 – and there is a possibility for longer-term de-escalation.

Instead of waiting on the sidelines to see how things play out, it's better to position for the long haul.

Just days before its negotiators headed to Switzerland for those tariff talks, China rolled out a substantial stimulus package loaded with financial incentives designed to get money flowing through the economy. 

Chinese policymakers lowered interest rates on mortgages and car loans to encourage consumer spending, while easing credit access for small businesses.

The reserve requirement ratio for banks was also cut by half a percentage point – effectively freeing up a cool 1 trillion Chinese yuan (US$138 billion).

They also injected 1.1 trillion yuan (US$152 billion) through relending programs, supporting everything from tech startups to elder care facilities.

With no guarantee of a lasting solution for tariffs past the 90-day truce, Beijing will likely keep their other economic tools at the ready.

This could mean further rate cuts or – perhaps more substantially – direct government spending.

The reserve requirement ratio (RRR) is the percentage of deposits that banks must hold as reserves rather than lend out.

When a central bank lowers this ratio, commercial banks can lend out more of their deposits to clients, increasing the supply of money and stimulating economic activity.