The calm before the next tariff storm?

Macroeconomic update for June 2025

The surprising 90-day tariff truce between the US and China sent markets soaring and recession fears receding. But this short-term relief shouldn’t be mistaken for a lasting fix, in our view. Tariffs remain historically high, and earlier trade war damage is likely still trickling through the real economy. Plus, the truce is fragile: if no deal is struck in 90 days, US President Donald Trump has signaled renewed tariff hikes. So, the current détente buys time, not necessarily peace. Interestingly, Trump’s shifting strategy may normalize 10 - 20 percent tariffs globally and up to 60 percent for China. What was once seen as a worst-case scenario is now considered to be “less bad”. Markets are cheering, but the core risks still exist: elevated tariffs, unpredictable policy, and fragile deals. With volatility still ever present, the rally could vanish just as fast as it appeared. Watch the CIO Monthly to learn more about Vontobel’s Multi Asset Boutique views on recent developments.

Key Takeaways

1. Buying time    
   The US-China trade truce buys time, but not necessarily peace. Structural imbalances like China’s oversupply and America’s excess demand are unlikely to be solved by political brinkmanship alone.  
   
   

2. Optimistic investors in a volatile environment    
   The 90-day pause sent markets soaring and prompted economists to trim the odds of a recession. But the de-escalation doesn’t mean the economy is in the clear as the average US tariff rate is now higher than at any time in a century.  
   
   

3. Rebound in stocks   
   Equities have pared losses since the trade de-escalation, but key risks linger, including the possibility of tensions flaring up again this summer.

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