Trade War Tariffs Slash Global GDP by $1.2 Trillion—Markets Surge on De-escalation Hopes

The U.S.-China trade conflict has inflicted a staggering $1.2 trillion hit on global GDP, according to the International Monetary Fund. However, recent developments suggest a potential thaw in relations.

Treasury Secretary Scott Bessent has labeled the ongoing trade war as “unsustainable,” highlighting the detrimental impact of 145% U.S. tariffs and China’s 125% retaliatory measures. He emphasized the need for de-escalation, though formal negotiations have yet to commence.

President Trump echoed this sentiment, announcing plans to “substantially” reduce tariffs on Chinese imports. This shift in tone has invigorated financial markets, with the S&P 500 and Nasdaq Composite rising by 2.5% and 2.7%, respectively.

Despite these positive signals, experts caution that a comprehensive trade agreement remains a distant prospect. The path to resolution is expected to be protracted, with Bessent estimating a potential deal within two to three years.