Eh, there is good news from the international political and trade scene! On Monday, May 14, 2025, the US and China finally reached an interim trade agreement after a warm and hopeful meeting in Switzerland. This is the first meeting since the US announced new tariffs that left many industries languishing last April.

Deal Details and Tariff Reduction

So, in this deal, the US and China agreed to lower their respective import tariffs by 115% for a minimum of 90 days. Check this: tariffs on US products in China will be cut from 125% to only 10%, while goods from China entering the US will be reduced from 145% to 30%. This is a significant step that is expected to cool the market temperature that had been heating up!

Despite this agreement, the joint statement at the meeting did not include all the details. However, there are reports that the two countries are also planning to ease various other trade barriers. Some of the specific steps reported include:

• Reuters said China would ease exports to the U.S., particularly for rare earth and magnets commodities vital to high-tech industries.
• Bloomberg also reported that the ban on the import of Boeing aircraft from the US was lifted.
• The US also announced a reduction in the ‘de minimis’ tariff for China from 120% to 54%, this tariff for low-value goods applies to goods worth up to 800 US dollars.

This breakthrough is quite encouraging. And what’s more interesting? Analysis from Goldman Sachs shows that the outlook for the US economy is brighter. They even lowered their U.S. recession projections from 45% to 35% and raised their economic growth projections for this year from 0.5% to 1%. This optimism cannot be separated from maintained inflation, where in April 2025 CPI inflation was recorded lower than expected, namely 2.3% YoY.

Global Impact and Monetary Policy Implications

With the improvement in the outlook from the trade war, it is expected that the Fed’s rate cuts will also slow down. According to the CME FedWatch Tool, the probability of a rate cut of more than 50 bps by the end of this year dropped drastically to 35.9% from the previous 75.7%.

Although an interim agreement has been reached, US President Donald Trump remains cautious. He stated that import tariffs for China could rise again if there is no satisfactory outcome in the next 90 days of negotiations. What is clear, he emphasized that tariffs will not return to as high as 145% as before.

After this deal, the US dollar index strengthened by 1.09% and triggered a big rally in the stock market. The Nasdaq Index jumped as much as 4.35%, followed by the S&P 500 and DJIA +3.26% and +2.81%, respectively. Asian stock markets also experienced similar gains, with the Nikkei and Hang Seng rising 2.24% and 1.57%, respectively. However, the price of gold, which is usually a safe haven, fell by 2.66%.

JCI and Indonesian Economic Indicators

What about Indonesia? JCI rose significantly by 2.15% to 6,979.8 on Wednesday, May 14, thanks to foreign capital inflows of 2.84 trillion rupiah. This is the highest daily inflow since the announcement of US reciprocal tariffs.

Conclusion: Although Indonesia has not yet reached a direct trade agreement with the US, this improving condition is expected to have a positive impact on our economy. In addition, declining external risks and improving investment sentiment have the potential to strengthen the rupiah exchange rate. Thus, Bank Indonesia may have more room to cut interest rates, to boost economic growth. How do you invest, optimistic for the future?