Tech surge fuels market gains amid trade talks

[UNITED STATES] U.S. stock indices closed higher on Tuesday, buoyed by strong performances from Nvidia and other semiconductor companies, as investors looked ahead to potential progress in U.S. trade negotiations. The S&P 500 rose 0.58%, the Dow climbed 0.51%, and the Nasdaq advanced 0.81%. Nvidia led the gains, surging nearly 3% and overtaking Microsoft in market capitalization, while Broadcom and Micron Technology also posted robust results. This tech-driven rally reflected renewed optimism that the U.S. administration would not impose the most severe tariffs initially threatened, reducing immediate recession fears.

The market’s positive sentiment was further supported by news that President Trump and China’s Xi Jinping are set to speak this week, raising hopes for greater clarity on the future of tariffs and trade relations. Investors were reassured by the administration’s willingness to negotiate, with officials requesting “best offers” from trading partners by Wednesday in a bid to accelerate talks before a self-imposed deadline. The prospect of diplomatic engagement, rather than abrupt escalation, helped risky assets recover after a turbulent spring.

Beyond technology, notable movers included Wells Fargo, which rose after the Federal Reserve lifted its longstanding asset cap, and Dollar General, which jumped on a strong sales forecast. However, some companies, like Kenvue, faced headwinds as retailers in the U.S. and China destocked due to tariff uncertainty. Meanwhile, economic data signaled a slowing labor market and a drop in factory orders, highlighting the broader impact of trade policy on the real economy.

Implications

For Businesses:

The temporary reduction in tariffs between the U.S. and China offers a short-term reprieve for manufacturers, retailers, and tech firms reliant on cross-border supply chains. However, the relief is fragile: many tariffs remain elevated, and the threat of renewed escalation persists if negotiations falter. Companies with diversified supply chains or domestic production, such as some U.S.-based chipmakers, are better positioned, while those heavily reliant on Chinese manufacturing remain at risk of higher costs and supply disruptions.

For Consumers:

Consumers may experience some relief from immediate price hikes, particularly on imported goods and electronics. Yet, the overall environment remains inflationary, with the OECD warning that higher tariffs could erode purchasing power and drive up prices for everyday items. Retailers, unable to absorb the full cost of tariffs, are likely to pass increases on to shoppers, especially if the 90-day tariff suspension lapses without a lasting agreement.

For Public Policy:

The current approach underscores the volatility of trade policy as a tool of economic and geopolitical leverage. While the U.S. administration’s willingness to negotiate has calmed markets for now, the ongoing uncertainty complicates monetary policy and fiscal planning. The OECD has downgraded U.S. and global growth forecasts, citing tariffs as a key drag on investment, supply chains, and consumer confidence. Policymakers face mounting pressure to balance strategic interests with economic stability.

What We Think

The market’s recent rebound highlights investors’ preference for negotiation over confrontation, but the underlying risks of a protracted trade conflict remain unresolved. The temporary tariff reductions between the U.S. and China are a positive step, yet they do not address the deeper structural tensions driving decoupling and supply chain realignment. For businesses, the lesson is clear: resilience now depends on flexibility, diversification, and the ability to adapt to shifting trade winds.

Consumers, meanwhile, are caught in the crosshairs of policy uncertainty. While frontloading purchases and stockpiling may offer short-term savings, persistent inflation and supply disruptions could weigh on household budgets in the months ahead. For policymakers, the challenge is to foster an environment where dialogue prevails over escalation, supporting both growth and national security objectives.

Ultimately, the current episode is a reminder that global markets are highly sensitive to policy signals and diplomatic tone. As the world’s two largest economies navigate their complex relationship, sustained engagement and clear communication will be essential to avoid renewed volatility. The coming weeks will test whether this fragile truce can evolve into a more durable framework for cooperation—or if the cycle of uncertainty will resume.