Overview: Temporary Truce, Tangible Relief

On August 12, 2025, the world’s two largest economies—the United States and China—announced a 90-day extension to their existing tariff truce, halting the next round of proposed import duties and easing pressure on global supply chains. The move brings short-term stability to global trade and injects confidence across commodities markets, which have been under severe stress in recent weeks.

Although the extension does not resolve the core issues behind the ongoing trade dispute, the temporary de-escalation has given markets a chance to breathe—and prices across industrial metals, agricultural goods, and energy products reacted swiftly.

Market Reaction: Commodities Rally on Trade Optimism

📈 Copper and Industrial Metals Surge

One of the biggest beneficiaries of the tariff truce was copper, often considered a bellwether for global manufacturing health. Prices jumped over 2.1% in early Tuesday trading, as the truce raised expectations for continued industrial activity in China—still the world’s largest consumer of base metals.

Aluminum and nickel also saw gains, supported by improved sentiment around factory output, machinery exports, and tech hardware trade flows.

Crude Oil Steadies on Demand Hopes

Oil prices stabilized after weeks of volatility, with Brent crude edging up by 0.9% to around $84.70 per barrel. The easing of trade tensions is expected to boost demand forecasts for the fourth quarter, particularly in Asia.

However, traders remain cautious as OPEC+ continues to signal supply discipline, and geopolitical risk premiums remain intact amid tensions in Eastern Europe and the Middle East.

Agricultural Commodities Bounce Back

U.S. soybean and corn futures rose nearly 1.4% after news of the truce extension. China is a major buyer of U.S. agricultural products, and the threat of new tariffs had weighed heavily on American farmers and agri-exporters.

The truce brings hope for renewed purchasing agreements, though analysts stress that lasting demand recovery will depend on diplomatic follow-through and broader economic stability in China.

Macroeconomic Implications: Inflation, Trade, and Policy

The decision to extend the truce reflects both nations’ desire to stabilize inflationary pressures and avoid further economic slowdown. In the U.S., core inflation remains stubborn, with supply chain constraints still a key contributor. In China, domestic demand is weakening, and export growth has slowed sharply.

Central Bank Watch: Fed & PBOC on Alert

• The Federal Reserve is closely monitoring trade developments as it prepares for its September rate decision.

• The People’s Bank of China (PBOC) is expected to introduce additional liquidity measures to support domestic consumption and credit.

A stable trade environment may give both banks more policy flexibility, reducing pressure to act aggressively if inflation or growth data surprises.

Geopolitical Strategy: Tactical Pause or Strategic Shift?

The 90-day extension is seen by analysts not as a breakthrough but a strategic pause. It allows both countries to continue back-channel negotiations while calming investor fears. However, unless structural issues—such as technology transfer, intellectual property, and market access—are addressed, tariffs could return in late 2025.

“This is not peace—it’s a ceasefire,” said one senior trade analyst. “But it’s enough to move the markets in the short term.”

Risks Still Linger: No Long-Term Guarantees

While commodities are rallying, underlying risks persist:

• Breakdown in negotiations could see tariffs snap back quickly.

• Global demand remains fragile, especially in Europe and emerging markets.

• Currency volatility, especially involving the yuan and dollar, could create renewed stress across commodity-linked economies.

Investors and supply chain managers are being urged to treat the truce as a temporary opportunity, not a structural turning point.

Key Takeaways:

• The U.S. and China agreed to a 90-day extension of their trade truce, averting new tariffs.

• Commodities markets—especially copper, oil, and soybeans—reacted positively.

• The truce offers short-term relief but no guarantee of a long-term resolution.

• Inflationary pressures and central bank decisions remain intertwined with trade policy.

• Markets are cautiously optimistic but aware of the underlying geopolitical risks.