On Wednesday of last week, President Trump announced a 90-day pause on all reciprocal tariffs imposed on our nation’s trading partners (excluding China). As a result, countries will see hefty levies reduced to a standard 10% rate. This news was celebrated by Wall Street, with the S&P 500, Dow Jones, and Nasdaq all gaining over 2% since the announcement.

This weekend, however, the White House made an even bigger, though less publicized, move.

Late Friday night, in a significant shift within the ongoing trade war, the U.S. announced a reciprocal tariff exemption for electronics exported from China, which includes computers, smartphones, and semiconductors.

While this announcement may have flown under the radar, its implications are immense: It represents the most significant development in the trade war since “Liberation Day” and surpasses even the 90-day pause.

We believe this could herald a 20% rally in the stock market.

What drives this optimism?

China exports over $100 billion worth of electronics to the U.S. annually, making it a critical component of global trade.

This means that those electronics are now shielded from the heft of the previous 145% tariffs from “Liberation Day,” dropping to a more manageable 20% (at least temporarily). The ramifications for the U.S. tariff landscape are profound.

There are four reasons this electronics exemption could invigorate the market, leading to a significant rally this summer…

The Impact of the $100 Billion Electronics Tariff Exemption

The 90-day tariff pause, which sparked last week’s relief rally, received widespread media attention. However, a closer inspection reveals it only reduced the average U.S. tariff rate by less than one percentage point, from just under 27% to slightly over 26%.

In contrast, the recent electronics exemption has cut the average U.S. tariff rate further, down to approximately 23%.

This change reflects more than three times the impact of last week’s announcement.

The volume of electronics in trade matters significantly. 

Electronics constitute more than 20% of total Chinese exports to the U.S. Reducing tariffs on this key sector significantly alleviates stress on the global trade framework.

Furthermore, Federal Reserve research indicates that every one-point increase in the average U.S. tariff rate detracts 0.14 percentage points from GDP. Prior to the exemption, the anticipated drag on U.S. GDP stood at -3.3%. Now, that projection has improved to -2.9%.

This improvement is crucial, especially as efforts continue to guide a slowing economy away from recession.

A Clear Trend: Tariff Reduction

In recent weeks, we have advised stakeholders to look beyond the noise and focus on the actual numbers.

Here’s what the data illustrates:

• After the “Liberation Day” tariffs were introduced, the average U.S. tariff rate jumped from 2.5% to nearly 27%.
• The 90-day pause reduced it to 26%.
• The recent electronics exemption lowered it further to 23%.
• Reports suggest that auto parts could be the next category for exemption, potentially bringing the average tariff rate down to 20% by the end of this week.

We have witnessed a change from 27% to 20% in less than two weeks.

This is not simply a fleeting dip. It signifies a trend.

However, the administration’s messaging remains inconsistent. This past Sunday, April 13, Commerce Secretary Howard Lutnick stated that the electronics tariffs were not genuinely exempt but merely postponed. Trump also reiterated that sectoral semiconductor tariffs are still on the table.

We interpret these mixed messages as a strategic maneuver.

These backtracking statements appear to be intentional. The administration aims to project strength while negotiating behind closed doors, keeping trading partners in suspense while the tariff rates continue to decline.

We expect this trend to persist, aiming for a target of 10% or lower by early summer.

Potential for Permanent Tariff Delay

Trump’s recent 90-day pause applies to reciprocal tariffs. However, Lutnick noted that sectoral tariffs on semiconductors could be implemented within the next 30 to 60 days.

This creates a one- to two-month opportunity to finalize trade agreements with China, the EU, and other trading partners before the pause concludes and the sectoral tariffs take effect.

If successful deals are forged—which we anticipate—then the proposed electronics tariffs may ultimately be shelved.

These tariffs could become another instance of policies that failed to materialize.

Importantly, timing is crucial.

We believe the administration is utilizing this window to de-escalate quietly and secure significant trade victories, setting the stage for a favorable outcome for Trump.