3 ETF Strategies to Follow on Temporary U.S.-China Trade Deal

The United States and China have reached an agreement to temporarily cut reciprocal tariffs, offering a hopeful pause in the prolonged trade conflict that has rattled global financial markets and raised concerns of a potential recession.

The tariff standoff had brought nearly $600 billion in bilateral trade to a halt, as quoted on Reuters. However, the latest diplomatic progress offered a reprieve.

90-Day Truce to Slash Tariffs

Following high-level negotiations in Geneva, U.S. Treasury Secretary Scott Bessent announced that both nations had consented to a 90-day suspension of escalating tariff measures. As part of the deal, tariffs on both sides will be cut by over 100 percentage points, returning to a baseline rate of 10%.

Market Response and Optimism

Financial markets reacted positively to the news. The dollar strengthened against major currencies, and Wall Street stock futures climbed, as investors became more optimistic that the risk of a global recession might be easing.

Talks Mark First High-Level Meeting Since Tariff Escalation

This Geneva meeting marked the first face-to-face engagement between senior economic officials from both countries since President Donald Trump resumed office and reignited tariff tensions. Trump had significantly increased tariffs on Chinese goods to 145% since January, while China responded by raising its tariffs to 125% and restricting rare earth exports vital to U.S. industries.

ETF Strategies to Follow

Against this backdrop, below we highlight a few exchange-traded fund (ETF) investing strategies that is likely to help investors’ portfolios.

Bet on Tech Socks

Tech and chip stocks surged Monday after the United States and China agreed to pause most tariffs. The tech-heavy U.S. stock index is on its way for its best trading day in more than a month. Apple and Amazon, both heavily exposed to China, jumped over 6% and 8% respectively.

Apple makes 90% of its iPhones in China. Apple recently warned tariffs could add $900 million to quarterly costs. Many sellers on Amazon rely on Chinese products.

Chipmakers like NVIDIA and TSMC also rallied, while Chinese tech names including Alibaba, JD.com, and Baidu saw strong gains.

So, bet on ETFs like The Technology Select Sector SPDR Fund XLK, VanEck Semiconductor ETF SMH and The Consumer Discretionary Select Sector SPDR Fund XLY.

Bet on Consumption as Global Growth Worries Ease

Oil, base metals, and agricultural commodities rallied after China and the U.S. agreed to lower tariffs on each other, as concerns over global growth have eased. Recent trade deals — both permanent and temporary — negotiated by the United States are expected to boost global demand for commodities, including soft, hard, and liquid assets.

ETFs like United States Oil Fund LP USO, SPDR S&P Metals and Mining ETF XME and Invesco DB Commodity Index Tracking Fund DBC should gain ahead.

Short Gold?

Gold has experienced a significant rally this year, with the SPDR Gold Trust GLD surging approximately 25%. Recession fears and the “Sell America” trade in April fueled strong safe-haven demand for the yellow metal, further strengthening its position.

However, those golden days may be nearing an end. With key trade deals—particularly between the United States and China—being struck, global stability is expected to be restored in the near term. This is likely to reduce the safe-haven demand for gold and weight on the precious metal’s prices.

Plus, the trade deal is expected to strengthen the U.S. dollar. Gold typically moves inversely to the U.S. dollar. The fact gives the metal another reason to decline. Investors thus can play inverse gold ETFs like ProShares UltraShort Gold GLL to profit from the scenario.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research