I was among those who believed in Trump’s trade war gamble because I thought that Trump had correctly assessed the relative strength of the parties in the negotiation, as well as the fact that he had no time before the midterms for anything other than dramatic shock therapy. It seems that, at least for now, Trump was correct.

China—which was the real target of the trade war, although Trump rightly knew that he’d have to bring other countries’ anti-American practices to an end, too—came to the negotiating table last week. In negotiations that Treasury Secretary Scott Bessent led on America’s half, the two countries have mutually agreed to slash tariffs for 90 days, with China also promising to remove a few other, as-yet-undefined non-tariff trade restrictions. The stock market is thrilled.

The two parties agreed to the following 90-day framework while final negotiations continue:

• The U.S will reduce Trump’s 145% tariff to 30%.
• China will reduce its 125% tariffs to 10%.
• Trump apparently will continue to suspend the anti-American “de minimis” exemptions, which had previously allowed duty-free access for low-value shipments from Asia (including small, mislabeled fentanyl shipments).
• The U.S. will continue to impose tariffs on China that are applicable to specific products, such as electric vehicles and steel.
• China agreed to remove certain non-tariff restrictions it had placed on America after Trump’s Tariffs went into effect. It appears that, while the agreement is vague, this could include stopping China’s new restrictions on exporting rare earth minerals to America and its blacklisting some American defense and tech firms.

What happened is not a new trade deal; it’s the equivalent of a ceasefire. However, it shows that the Chinese are willing to bend—and of course, Trump had said from the beginning that he would bend as soon as the Chinese did.

The stock market was ecstatic over the news of the 90-day trade war ceasefire:

Stocks surged after U.S. and Chinese officials said they agreed to temporarily suspend most of the tariffs they have imposed on each other, the latest sign that trade policy announcements are the main driver of market movements since President Trump returned to office.

The S&P 500 gained nearly 3 percent in early trading, putting the index on track for its best day since April 9, when a huge rally was spurred by Mr. Trump pausing his “reciprocal” tariffs on all countries except China. The tech-heavy Nasdaq climbed even higher, rising about 4 percent.

I feel a bit smug because I knew that Trump’s tariffs weren’t Smoot-Hawley reincarnated and that it’s not 1929 anymore, so we weren’t going to see a massive crash. America is a debtor, not a creditor, nation, so countries would want to negotiate new tariffs with the world’s single largest consumer of imported goods, especially goods imported from China.

In addition, unlike the 1920s, most Americans aren’t buying stocks on the margin with 10% down and 90% promised if the stocks go up. Strict regulations now control margin purchases, protecting against the collapse of the American financial system.

All in all, this is good news for Trump and, much more importantly, it’s good news for America.

Image by PickPik.