Business Rundown: U.S. & China Agree To Slash Tariffs
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I'm Taylor Riggs and this is the Fox Business Rundown. Monday, May 12, 2025. The United States and China have agreed to slash the majority of their tariffs on each other for 90 days as the two nations plan to continue talks on a broader trade deal. News of this tariff truce broke early in the morning on Monday, sending global markets soaring. I think the market's been telling you

After weeks of media speculation and assurances of progress being made by the White House...

The Trump administration and China announced that they would be de-escalating the trade war tensions. China will cut their tariffs on America from 125% to just 10%, while the U.S. has agreed to cut tariffs on China to 30%, down from 145%.

Treasury Secretary Scott Bessent recently teased that an agreement with China was close at hand. In fact, there was a heavy emphasis placed on this past weekend, where Secretary Bessent joined U.S. Trade Representative Jameson Greer in Switzerland for crucial trade talks with Chinese counterparts. It was there in Geneva that they ironed out the first steps of this trade breakthrough, which have sent global markets jumping.

From Europe to Asia and certainly within the U.S., investors eagerly ran to the markets with their money to get in on this apparent market surge. This morning, it looks as though the Dow is on track to exit correction territory. Mag7 stocks are rallying across the board and the Nasdaq appears on track to exit a bear market.

With the Trump administration in China agreeing to a much more aggressive reduction in tariffs than most had expected, how should Americans be interpreting this news? It is really about relativity, right? When you had the tariffs at 145%,

where, of course, nobody's doing business. We have tariffs that high and you bring it down by 115 percent. That starts to look pretty good. Ryan Payne is the president of Payne Capital Management, and I'm pleased to say he joins me now. 30 percent tariff on China.

and then a 10% tariff on their goods, essentially coming or going into their country, it starts to look a lot better than what we've seen already. And maybe that's part of the strategy here. I didn't read out of the deal, but it seems like you start with shock and awe. You start with a big, big number, and you start to whittle it down into a more reasonable number. And I think that's what the market's been telling you now for a couple of weeks. I mean, we've seen the market really

moving in the right direction since like April 8th. And markets are typically pretty good forecasting mechanisms for the future. And I think the market's been telling you

that basically these deals were going to get done. We are going to get some resolution and business is going to move forward. And that's why we've had such a nice rebound in the market, not only today on Monday, but really over the course of the last couple of weeks. I want to talk about the last couple of weeks because April 2nd, Liberation Day, 4 p.m., the S&P 500 closes at a 56.71 mark.

4-15, the big Greek letter alphabet soup comes out Liberation Day and we all sort of fall out of bed, like you said, until April 8th. I take a look at the S&P 500 today and we are 200 almost points above Liberation Day, you know, over about 5,800 or so on the S&P 500 around midday on Monday.

Is that the sign where had you just not panicked and just not sold and just stayed the course, you would have been okay? Well, yeah. First off, I think maybe we don't have to rebrand Liberation Day like we thought so originally. Maybe it will turn out to be Liberation Day after all. Yeah. Yeah, I think, you know, one thing I warned about the last couple weeks, I've stayed relatively bullish. You know, I thought the economy was in, if you look past tariffs and the economy is actually in relatively good shape, you know,

But we have an old saying at my firm, Paying Capital Management, and that is markets don't settle down, they settle up. And that's why it's almost impossible to time markets. If you ever look at the long-term statistics on it, if you take like the best 10 trading days out of any 10-year, 20-year period in the market, I mean, your turn gets reduced drastically, right?

And this is a perfect example of that, right? I mean, if you look at how quickly markets can turn on a dime and if you've been sitting in cash and you felt smart because you were in cash, well, you can look pretty foolish pretty quickly. And I think this is just a great example of that, where timing the market is really a treacherous strategy.

And it's one we definitely don't deploy at my firm. And I think, you know, as an investor, you've got to keep your eye on the prize. And that's really, you know, looking at the long term and not the shorter term, because the short term can get very uncertain, very volatile, very quickly. I want to talk about big tech. One of the big leaders today, we mentioned in the introduction that, you know, the MAG-7 rallying across the board, NASDAQ looks like it'll finally exit that bear market, which is that big, you know, 20% decline from recent highs. Right.

So is big tech the clear, obvious winner from lower tensions with China? How do you see that? Well, I think we felt a little bit of a live by the sword, die by the sword the last couple of weeks, because if you were over-concentrated in the Magnificent Seven, artificial intelligence, you got slaughtered. There's no way of going about it any differently the last couple of weeks. And now you're getting a nice rebound there.

And I do think we have an everything rally right now. I think there's so much money sitting on the sidelines. I think a lot of people have missed this opportunity. They've been sitting in cash, just specifically institutional investors. And if you look at the negative sentiment amongst institutional investors, it was very high. So I think you have sort of like an all everything rally melt up going on right now. And I think tech will participate in that.

but if you're a longer term investor like i am um you know i think tech still is a bit long in the tooth i mean if you start looking at the mag 7 trades at 25 times forward earnings it's still not relatively cheap if you look at the amount of money being spent on artificial intelligence you're probably getting towards some sort of peak here uh in terms of how much spending is being done so you know i think there is a lot of good news right now around tariffs and i think all those stocks will rebound because they got hit the hardest

But I still think if you're thinking long term right now, you want to start thinking about moving from the picks and shovels of artificial intelligence and think about how every single company is going to benefit from artificial intelligence, automation, robotics over the course of the next couple of years. And I even look at my own business, kind of a microcosm of that. Like if we look at our whole presentation, the way we put proposals together,

Um, you know, we used to have like a lot of interns working on them, people in the office with artificial intelligence. Now we're bringing that process down to like one person, um, and very little manpower to make that happen. And, you know, if you talk about like client meetings, they used to be after used to write notes after those meetings. Now they're using artificial intelligence on these zoom calls to take the notes for them.

So I think every business, the efficiencies that you're going to build into companies, like anything that's not an artificial intelligence company, is where the margins are going to expand and every company is going to benefit from that. So I urge you to diversify your exposure away from just owning tech. And I've been saying that for quite a while, actually. And I do still think that's the correct way to manage your portfolio. I think what markets are trying to figure out, though, is how much damage did we do in the last six weeks or so?

You know, we're going to hear from Walmart on Thursday, for example. Companies have been pulling guidance because they've said that tariffs have created uncertainty. How much do you now read through or ignore any of those comments now that there's sort of this newer trend?

paper deal around trade tariffs that can sort of potentially erase the uncertainty of the last six weeks. Do you now sort of ignore what we hear from companies about what happened six weeks ago?

Yeah, I think you do. Markets are good forecasters, and the market is looking through this. Remember, the market repriced right away. All of a sudden, Liberation Day hit, and we saw some stocks get hit incredibly hard, looking like Restoration Hardware, for instance, and that stock dropped like a rock. So the bad news got input into stock prices very, very quickly. So I think at this point, you've got to look for surprises in the positive, because the market's already priced in the bad news, and probably at the

you know, the max pain, no pun intended, my last name is pain, you know, where these stocks could trade. So I think, you know, you should have more expectations of surprising the positive because we went from, you know, trade, we went from tariffs to now we're looking at trade deals. And I think that is going to be kind of a healing, you know, kind of an ointment here for the overall market. So yeah, I think you gotta look past that and you gotta start looking at the underlying economic data again, which again has been pretty strong.

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They violate the rules all the time. How do you negotiate with someone who you know won't follow through? Are the markets being too optimistic and not maybe thinking about the downside risk that is, you know, China walks away at any moment because they inherently don't ever follow through in good faith deals?

Well, the market's been up since those first trade deals that maybe they didn't follow through. And I think the market's actually factoring that they cheat. I think that's part of the reason why markets recovered here, too, because let's face it, some of those goods, they end up getting rerouted through places like Vietnam, Mexico. Yes, it happens. And maybe they crack down a little bit further this time around. But I think what the market cares about is, are we doing business with China? Are we trading with China or not? Whether they're cheating or not,

I'm sure it's always a gray area and I'm sure there's going to be cheating going on. And I think the answer there is business is going to resume again.

And if some of that gets rerouted to different places and we still import for China that way, I think that doesn't end. I think it's impossible to police all of that. So, yeah, I think that is priced into the market. And I think that's an assumption that's already assumed when these trade deals are put together, frankly. Call me a cynic. No, no. I like it. I like that you're being a realist, maybe not a total cynic. Talk to me then about GDP and economic data, because a lot of people said, well, the GDP was negative in the first quarter because China.

A lot of the input into GDP is imports, which is a negative sign in front of GDP. So the more we import, the more negative GDP is. That's just the way the math calculation works. For the next 90 days, a lot of people are assuming we are now going to be importing like crazy in case the 90-day pause expires and then we go back to tariffs or larger tariffs than currently expected.

Are we then guaranteed a negative Q1 GDP print, maybe Q2? Do we ignore it if it's negative? How do you think about the health of the consumer? I think the health of the consumer is really good. I think you hit the nail on the head. We had front-loading in front of the tariffs. So our trade deficit, it was like an annualized 100. It was a 40% higher annualized rate of tariffs.

of actual imports, right? And that gets minus from your GDP number, which that number could also be reconfigured throughout the year as well. So it was like a negative 0.05% or something like that. It was very close, right? It was somewhat, it was slightly negative, we'll say that. But bottom line is if you look at the underlying data, if you look at businesses, you look at consumers, they continue to spend, like if you look at visa data through April, there's no sign of recession there, consumers are spending.

I think it really comes down to some basic concepts and that's number one, people have jobs.

If you look at unemployment, it's still very low. You still have a 50-year low in unemployment. And if you look at wage growth, it was something like 3.8% over the last 12 months. We know inflation tracking closer to like 2.4%. So wages are growing over inflation. People's ability to spend money drives the economy. So as long as that trend continues, and it looks like it will, the consumer is going to continue to spend. GDP growth should accelerate this year.

As wages continue to go higher and inflation continues to moderate and we get past all this tariff turmoil. So I'm actually I think, you know, we're going to have positive GDP growth this year. And I think no recession. And I think if anything, it'll probably accelerate throughout the year.

I want to end with you on big pharma and some of these drug companies, if you can. I don't know if you're an investor, if you have them in your portfolio, if you've even looked at the valuations. But the other big news today was an executive order that the president signed, and he was flanked by RFK Jr. and FDA Commissioner Marty McCary and Dr. Oz and, you know, a big group of roundtable people who are really concerned about the high prices of

that Americans pay for drugs. And the president cited statistics that 40 to 60 percent of any given drug makers revenue comes from the U.S. because we pay, you know, maybe 10, 30, 40, whatever percent more than European countries, for example, pay for those drugs. And there's a worry that there's a big hit to the profitability of these companies.

Does this change any thesis or analysis about the way you invest in drug makers and healthcare stocks? If you look at healthcare stocks in general, they still trade relatively cheap. And I'm looking today like stock like Merck is actually up. So I don't know broadly how much that's going to affect the healthcare industry. I'm sure some companies specifically, where their bottom line might be more affected than others if their price is here. The discrepancy is so much greater than it is in Europe. But I think overall, if you look at healthcare stocks,

earnings growth should be relatively strong. They still traded a cheaper multiple than the S&P 500. So I have to think owning healthcare here is probably a good deal. I would be very bullish on healthcare at the moment. Ryan Payne, always so great to have you. Happy Monday trading and nice to finally have some green on the screen, like you mentioned. The pleasure is always mine, Taylor. Have a great day.

Hey, I'm Trey Gowdy, host of the Trey Gowdy Podcast. I hope you will join me every Tuesday and Thursday as we navigate life together and hopefully find ourselves a little bit better on the other side. Listen and follow now at foxnewspodcast.com.