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Tariffs To Fall By Another $300BN Based On US-China Talks

by Fortem Financial May 13, 2025

Good morning. We hope everyone had a great Mother’s Day. No rest in Washington this weekend with:

(1) US-China trade talks leading to a 90-day reprieve of most tariffs ($300bn reduction annualized); (2) The first provisions of the tax bill released showing increases in the child tax credit, small business deduction, and estate tax exemption; (3) The middle-ground Medicaid changes taken in the first draft of the tax bill; (4) Trump readying his plan to impose large price controls on pharmaceuticals by executive action; and (5) Debt ceiling X date.

This is on top of negotiations in Ukraine-Russia and India-Pakistan, a Gaza hostage release, and Iran nuclear talks ahead of Trump’s Middle East visit. Pulling all these items together, the US China talks produced more tariff relief than we were expecting.

We had around $200bn penciled in going into the weekend and ended up with $300bn. This is a de-escalation move, not a trade deal. The reprieve is for 90 days to start trade negotiations. China is getting the same reprieve other countries received in mid-April. Still, our estimate is another $300bn tariff reduction. Total tariffs stand at $260bn on a 12-month basis. Treasury Secretary Bessent has cut tariffs from $658bn to $260bn during the past 30 days.

Consumer goods are the big winner here as they were not subject to most of the China tariffs remaining in place from Trump’s first term, but were part of the tariffs being reduced. There is now a better sequencing of tax and trade policy although many of the consumer and small business tax benefits won’t hit until 2026.

 

S&P 500 High Us Revenue Exposure Rel. Low US Exposure (EX-UTL & RE) & Trump 2.0 Tariffs / Tariff Relief, by Date of Announcement

Source: Strategas

 

Market and Index Changes for the Week Ending 5/9/2025

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments. Data provided by Refinitiv.

 

Sincerely,

Fortem Financial
(760) 206-8500
team@fortemfin.com

 

 

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