Talk about a productive weekend. Forget cleaning out the garage, U.S.-Chinese negotiators might have just saved the global economy from recession.

Mutual tariffs between the world's two largest economies have been slashed for 90 days to well below levels markets had been expecting. The worst-case scenario of a complete collapse in trade has been avoided, for now.

China's exports to the U.S. are likely to rebound sharply, easing inflation concerns for a while. Retailers like Best Buy and toy company Mattel will be able to stock up on inventory, while shipping and freight stocks should enjoy a boom. April's consumer price index data, due on Tuesday, will be closely watched for the first signs of price rises from tariff hikes. But it's now a warning of what could happen if a permanent deal isn't reached rather than a taste of what will inevitably come.

So what are the prospects for a lasting agreement? Treasury Secretary Scott Bessent looks to be in the driving seat in negotiations and is a relatively moderate voice on trade. Fentanyl-related tariffs on China are still in place, and progress there would satisfy a priority for President Donald Trump.

However, uncertainty still reigns. A company like iPhone-maker Apple, which has pledged to diversify its supply chain beyond China, has to decide if it will swallow the resulting costs. That kind of uncertainty means investors are unlikely to drive markets back to the all-time highs of earlier this year.

Constructive talks over one weekend are a good starting point, but markets need more than a tariff hiatus to provide the certainty they crave.

-- Adam Clark

*** Join Barron's senior managing editor Lauren R. Rublin, deputy editor Ben Levisohn, and Christopher Rossbach, chief investment officer of J Stern & Co., today at noon when they discuss the outlook for financial markets, industry sectors, and individual stocks. Sign up here.

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The U.S. and China Agree to Slash Tariffs for 90 Days

The U.S. and China agreed Monday to slash tariffs on each other's goods for 90 days in a major de-escalation of trade tensions between the world's two largest economies. The agreement came after trade talks in Switzerland over the weekend.

   -- U.S. Treasury Secretary Scott Bessent said both sides have agreed to 
      lower levies by 115%. That means President Donald Trump's 125% reciprocal 
      tariffs on Chinese goods will be cut to 10%, while Beijing's 125% levy 
      will also fall to just 10%. A separate 20% tariff on China relating to 
      fentanyl will remain. 
 
   -- "The consensus from both delegations this weekend was neither side wants 
      a decoupling," Bessent said at a press conference in Geneva. "We 
      concluded that we have shared interest and we both have an interest in 
      balanced trade." 
 
   -- China welcomed the agreement, calling it an "important step" toward 
      resolving the differences between the two countries, a Commerce Ministry 
      spokesperson said Monday. It added that Beijing hopes the U.S. will 
      "thoroughly correct the wrong practice of unilateral tariff increases. 
 
   -- Separately, Commerce Secretary Howard Lutnick told CNN Sunday that 
      Trump's 10% baseline tariff on goods imported from around the world will 
      be in place "for the foreseeable future" and the U.S. would not go below 
      that level. Trump's pause on the country specific tariffs ends in July. 

What's Next: The Court of International Trade will hear arguments Tuesday in a case filed by five small businesses that depend on imports. The businesses sued the Trump administration over the so-called reciprocal tariffs, because they weren't approved by Congress and aren't an emergency under the order Trump issued.

-- Callum Keown, Liz Moyer and Janet H. Cho

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Trump Renews Push for Most-Favored-Nation Drug Pricing

Pharmaceutical companies are coming under further pressure as President Trump said Sunday that he plans to sign an executive order that would reduce the cost of drugs in the U.S. by bringing back the so-called most-favored nation drug policy.

   -- "I will be instituting a MOST FAVORED NATION'S POLICY whereby the United 
      States will pay the same price as the Nation that pays the lowest price 
      anywhere in the World," Trump wrote on Truth Social late Sunday. He said 
      he planned to sign the executive order on Monday. 
 
   -- "Most favored nation" is the name the Trump administration gave to a 2020 
      rule that would have pegged the prices Medicare pays for certain drugs to 
      match prices in other wealthy nations. 
 
   -- Trump's announcement is a reversal from his 2024 campaign, which walked 
      back the drug pricing proposal, much to the pharmaceutical industry's 
      relief. 
 
   -- In recent years, the drug industry has been upset with former President 
      Joe Biden's drug-price negotiation program, which allows Medicare to pay 
      less for certain medicines. 

What's Next: Trump's Sunday night post pointed toward a more sweeping order than experts and analysts had anticipated last week. The reaction of healthcare stocks will depend on the fine print of any policy announced.

-- Josh Nathan-Kazis and Elsa Ohlen

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April Consumer Price Index Could Show Effect of Tariffs

The April consumer price index coming Tuesday will be the first inflation-related data release that might reflect fallout from President Trump's tariffs, which were announced at the beginning of last month. Economists are expecting inflation to rise 2.4% from a year ago, with core inflation rising 2.8%.

   -- Separately, this week's producer price index for April is expected to 
      show a 2.5% rise from a year ago. And retail sales for April, also coming 
      Thursday, are expected to be flat from the prior month, after a 1.5% jump 
      in March that reflected people buying to get ahead of tariffs. 
 
   -- Federal Reserve policymakers at the Hoover Monetary Policy Conference on 
      Friday echoed Chair Jerome Powell's call for patience and more data on 
      how tariffs ripple through the economy before considering adjusting 
      interest rates. Fed Gov. Lisa Cook said trade disruptions and uncertainty 
      could soon weigh on productivity. 
 
   -- Cook expects a drag on productivity in the near term stemming from the 
      recent changes to trade policy and the "related uncertainty," saying 
      companies are scaling back investment, shelving big spending plans, and 
      absorbing higher imported materials costs. 
 
   -- Tariffs coming after an extended postpandemic period of elevated 
      inflation could provoke an outsized reaction, Cleveland Fed President 
      Beth Hammack said. St. Louis Fed President Alberto Musalem sees one 
      potential path where higher inflation is short-lived and concentrated in 
      the second half of 2025, and the other with more persistent inflation. 

What's Next: The University of Michigan's preliminary reading of its May consumer sentiment survey on Friday is expected to rise slightly from April's 52.2 reading, which was the lowest since July 2022. Consumers' inflation expectations for the year ahead increased to 6.5% in April, the highest since 1981.

-- Nicole Goodkind, Dan Lam, and Janet H. Cho

***

Air Travel Through Newark Airport Could Be Delayed 'Several Weeks'

Transportation Secretary Sean Duffy said travelers flying through Newark Liberty International Airport can expect "several weeks" of flight cuts as regulators try to address delays, technical issues, and air-traffic controller shortages by reducing flight volume through the busy hub.

   -- "We actually have brought down the number of airplanes that come in and 
      leave Newark," Duffy told NBC's Meet the Press on Sunday. He and acting 
      FAA Administrator Chris Rocheleau will meet Wednesday with the airlines 
      that fly through Newark to discuss reduced scheduling. 
 
   -- The Federal Aviation Administration ordered a brief ground stop Sunday 
      morning at Newark Liberty because of a telecommunications issue at the 
      Philadelphia facility that guides aircraft in and out of Newark airport. 
      Operations have returned to normal. 
 
   -- Newark airport has experienced flight disruptions for days, amid ongoing 
      runway construction and a radar that went black for 90 seconds early 
      Friday morning, similar to what happened there on April 28. More than 80 
      flights were canceled Sunday and over 200 flights delayed, according to 
      FlightAware.com. 
 
   -- A weaker U.S. dollar could make European vacations more expensive this 
      summer. The euro is up 12% against the dollar since January, while the 
      British pound is up 7%. The dollar index comparing the U.S. currency with 
      a basket of foreign currencies, has declined 7.5% this year. 

What's Next: United Airlines CEO Scott Kirby told CBS's Face the Nation on Sunday that things should improve in mid-June, when Newark's runway construction ends, but that flight cuts could linger through the summer. Newark has canceled 75 inbound and outbound flights today, and 45 flights on Tuesday, according to FlightAware.

-- Liz Moyer and Janet H. Cho

***

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