Stocks rose higher in the morning after the U.S. and China announced a deal to reduce reciprocity tariffs, giving investors a sense of relief that they feared a major recession in President Donald Trump’s trade policy.

The Dow Jones industrial average increased by about 1,000 points, an increase of about 2.5%. The S&P 500 is the most extensive stock index, with an increase of 3%. Technology-focused Nasdaq shares rose 3.9%.

In addition to stocks, other signs are increasingly optimistic that the economic damage from tariffs may eventually be restricted. Most notably, the chances of keeping interest rates at current levels soaring at the Fed's July meeting due to concerns that current inflation levels will not decrease. There is growing expectation that the tariff-related slowdown will prompt the Fed to lower interest rates to boost the economy.

In a joint statement earlier Monday, the U.S. announced it would reduce its duty on Chinese imports from 145% to 30%, while China's tax on U.S. import taxes will be reduced from 125% to 10%. For the United States, a 30% rate represents a baseline rate of 10%, plus a 20% rate that allows China to curb fentanyl flow.

This alleviates some concerns about the direction of the U.S. economy and what it means for U.S. companies.

"We believe that the risk of a more severe recession is now more limited and we rate the stock as attractive," UBS analysts said in a note to clients later Sunday.

Even with Monday's rebound, the major U.S. indexes are lower than Election Day. The Dow Jones Index fell 3%, the S&P 500 fell 3%, while Nasdaq stock fell 5.2%.

Even if the tariff reduction is greater than some analysts expect, tensions remain, and goods shipped from China to China will still be more expensive for U.S. consumers than timely situations compared to pre-renewal situations.

Capital Econ analysts said in a note that when it comes to considerations on other product exclusions, there will be actually a 30% interest rate (actually 40%) “still much higher in other countries than most countries”, according to Capital Econ analysts.

At the same time, analysts said that first, “the potential pressure to put the United States and China into a collision course is mainly due to the huge trade imbalance caused by the United States and China,” analysts said.

Even worse, the push for the U.S. push for countries like the UK to exclude China from supply chains, analysts wrote, “there are wider now.”

Treasury Secretary Scott Bessent said in a CNBC appearance that it would be "incredible" that tariffs would be below 10% even if further negotiation breakthroughs were reached. He also said that the United States will continue to seek China's "decoupling" in strategic industries such as steel and semiconductors.

Still, he reached an optimistic view of the prospects for future meetings.

“We’ve done two days of work,” he said. “So, I think we’ll meet again in the next few weeks to reach a more fulfilling agreement.”