The financial markets just had a bit of a mood swing.

After a euphoric Monday rally sparked by a surprise 90-day tariff pause between the U.S. and China, global stocks and the dollar eased on Tuesday, as reality settled in.

Investors are coming down from the initial sugar high, and taking a harder look at the road ahead.

Relief, But No Resolution

On paper, the truce looks promising. The U.S. and China agreed to temporarily lower tariffs, the U.S. dropping rates from 145% to 30%, and China easing its duties from 125% to 10%. There’s also a new cut to the “de minimis” threshold, which affects small-value imports from China.

But here’s the catch: despite the headline-grabbing changes, tariffs are still significantly higher than they were a year ago. Fitch Ratings estimates the effective U.S. tariff rate is now 13.1%, down from 22.8%, but that’s still miles above the 2.3% level seen in late 2024.

So yes, markets cheered at first, Wall Street surged 3.3% on Monday, and European stocks opened higher Tuesday, May 13, 2025, helped by strong earnings from companies like Bayer and Vestas, both jumping 10%. But by midday, gains had narrowed to just 0.2% on the STOXX 600 index.

U.S. Futures Dip, Dollar Softens

The optimism didn’t last long. Futures on the S&P 500 and Nasdaq dropped between 0.2% and 0.3%, a sign that investors are still cautious about U.S. assets. Even Amazon (AMZN), which rallied 8% on Monday, gave up 0.4% in premarket trading.

The U.S. dollar, which had its best day in weeks on Monday, also started to slip. The euro nudged up to $1.1109, the yen strengthened, and the pound ticked up to $1.3206.

Investors are Focused on U.S. Inflation and the Fed

Investors are now shifting their attention to U.S. inflation data, due Tuesday. The outcome could shake up expectations for what the Federal Reserve does next.

Thanks to the trade de-escalation, traders have lowered their bets on how much the Fed might cut interest rates this year. Just a few weeks ago, markets were pricing in 100+ basis points in cuts. Now? Only 56 basis points.

With 10-year Treasury yields holding steady at 4.455%, it’s clear the bond market is also waiting for more concrete signs of where inflation is headed.

Commodities Weren’t Left Out of the Party

Oil prices climbed again on Tuesday, May 13, 2025, rising 0.8% to $65.48 per barrel, building on Monday’s 1.2% jump. Gold, after taking a 2% hit as investors bailed on safe havens, edged up 0.6% to $3,254 an ounce.

This 90-day trade truce is a breather, not a breakthrough. Investors are grateful for the pause, but they know the real issues, global economic uncertainty, sticky inflation, and geopolitical unpredictability, haven’t disappeared.