Wall Street Sinks as US-China Trade Truce Fails to Impress
Tech stocks and Chinese ADRs lead the decline as investors weigh a fragile agreement that leaves major tariffs and tech restrictions in place.
U.S. stocks retreated on Wednesday as a highly anticipated trade truce between Washington and Beijing underwhelmed investors, who were hoping for a more decisive rollback of persistent tariffs and technology sanctions.
The sell-off was most pronounced in the technology sector and among U.S.-listed Chinese companies, which have served as a barometer for trade relations between the world's two largest economies. The fragile agreement, reached after a meeting between Presidents Trump and Xi, sparked a risk-off sentiment across Wall Street as market participants concluded the deal lacked the substance to resolve core economic conflicts.
Technology giants and semiconductor firms, already navigating a complex web of export controls, faced immediate pressure. Meta Platforms (META) saw its shares slide, closing down 11.3% at $666.47. The broader tech sector is particularly sensitive to trade frictions, as companies like Nvidia and Apple have been working to diversify supply chains away from China amid ongoing tensions over access to cutting-edge technologies.
Chinese American Depositary Receipts (ADRs) also tumbled on the news. E-commerce titan Alibaba Group (BABA) fell 3.4% to $173.93, while PDD Holdings (PDD), parent of the fast-growing online marketplace Temu, dropped 1.5% to $136.01.
Investors had priced in optimism for a more comprehensive pact, but the resulting agreement appeared to be a temporary de-escalation rather than a long-term solution. The truce reportedly includes a pause on further tariff hikes and renewed commitments from China to curb fentanyl production. However, it leaves the bulk of existing tariffs in place and fails to address the structural issues that have fueled the trade war, from intellectual property disputes to semiconductor export bans.
Analysts noted that the market reaction was a classic case of 'sell the news' after a period of optimistic anticipation. “This agreement seems to be more about managing optics than resolving fundamental disagreements,” noted a strategist. The underlying structural imbalances and the potential for renewed tensions remain significant headwinds, according to analysis from the Atlantic Council.
The trade conflict has already had a tangible impact on corporate strategy. PDD Holdings has faced direct challenges from U.S. tariff policy, particularly moves to eliminate the de minimis provision that allowed duty-free imports of packages valued under $800—a key component of its business model. The threat of wider tariffs, including a potential 100% levy on all Chinese imports, has previously sent Chinese tech stocks plunging and forced companies to re-evaluate their global logistics.
For companies like Alibaba, while the majority of its revenue is derived from its domestic market in China, a protracted trade war threatens to weaken consumer demand and disrupt supply chains. The constant threat of delisting from U.S. exchanges has added another layer of regulatory risk for investors in Chinese ADRs.
Looking forward, the market will be closely watching for follow-through from both Washington and Beijing. Without concrete steps to dismantle the existing tariff structures and provide clarity on technology policy, investor sentiment is likely to remain fragile. The focus now shifts back to corporate earnings and domestic economic data as market participants gauge whether the economy can withstand the prolonged uncertainty of this pivotal geopolitical conflict.