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Stocks are trading sharply higher across many sectors to start today's session following positive developments on the trade front with China. The two sides held talks in Geneva over the weekend. The broad result is that both sides have agreed to de-escalate for now as discussions are expected to continue in the coming weeks.

• The White House announced that China agreed to remove the retaliatory tariffs it announced since April 4 and will also suspend or remove the non-tariff countermeasures taken against the US since April 2. China will also suspend its initial 34% tariff on the US it announced on April 4 for 90 days, but will retain a 10% tariff during the period of the pause. The key takeaway is that China agreed to cut its retaliatory tariffs on US goods to 10% from 125%.
• On the US side, it agreed to remove the additional tariffs it imposed on China on April 8 and April 9, but will retain all duties imposed on China prior to April 2. The US will suspend its 34% reciprocal tariff imposed on April 2 for 90 days, but retain a 10% tariff during the period of the pause. The White House says the 10% tariff continues to set a fair baseline. Basically, the US will reduce its so-called Liberation Day "reciprocal" tariffs on China to 10% from 125%.

Granted, these are not final agreements and a lot can change in the next 90 days. However, the overall sentiment strikes us as the two sides making more progress than expected and the tariff reductions were more substantial than expected, especially considering this was more of a preliminary meeting.

There was real concern that the two sides would not make progress. This was not a given. There were reports last week that China was holding firm and willing to wait the US out. Also, this was only the first in-person talks between the two countries since the tariffs were announced. As such, it was difficult to gauge what might happen.

In addition to just the tariff numbers, another benefit is that the agreement provide some clarity for businesses. A common theme we heard on many Q1 earnings calls was that companies and/or their clients were pausing on investment decisions until we had more clarity on trade. While not final numbers, this deal and the UK deal last week provides a framework and we suspect it will convince business leaders that a final deal is going to be reached at some point. This should allow them to make investment/spend decisions. On a final note, it is not just stock trading higher today. The dollar is up today and gold is down sharply.