Global markets were mixed on Thursday as investors digested renewed tensions between the United States and China alongside growing expectations of further interest rate cuts by the US Federal Reserve.
Equities have fluctuated this week after former President Donald Trump reignited trade tensions with Beijing, threatening to impose 100% tariffs on Chinese imports in response to China’s recent export restrictions on rare earth minerals.
Although Trump later softened his tone, the rhetoric prompted a series of retaliatory statements from both sides, fueling concerns that the fragile détente between the two economic superpowers may be unraveling.
Speaking to reporters on Wednesday, Trump said the U.S. was now actively engaged in a trade war with China.
“Well, you’re in one now,” he said, when asked whether a prolonged dispute was likely if he failed to reach a deal with Chinese President Xi Jinping.
“If we didn’t have tariffs, we would be exposed as being a nothing,” Trump added, defending his tariff strategy.
His remarks came as Treasury Secretary Scott Bessent appeared to strike a more conciliatory tone, suggesting the US could consider extending the current tariff suspension in exchange for a pause on China’s rare earth curbs.
The US and China have been renewing three-month tariff suspensions since May as negotiations continue toward a broader trade agreement.
“Is it possible we go to a longer roll in return for a delay? Perhaps,” Bessent said, adding that discussions were ongoing ahead of the Asia-Pacific Economic Cooperation (APEC) summit in South Korea, where Trump and Xi are expected to meet.
Despite the latest flare-up, Bessent confirmed to CNBC that the meeting was still on schedule.
“Together, they’re running the classic good cop, bad cop routine,” said Stephen Innes of SPI Asset Management. “Trump’s declaration that the U.S. is ‘in a trade war’ with China sets the tone, while Bessent — the newly minted ‘cop of calm’ — floats a possible extension of the tariff truce if China holds off on rare-earth restrictions.”
“For a market addicted to ambiguity, that’s the perfect cocktail — one part anxiety, one part relief, stirred, not shaken,” Innes added.
Asia Mostly Higher, Europe Weaker
Most Asian markets followed Wall Street higher amid optimism over potential Fed easing. Tokyo, Shanghai, Sydney, Seoul, Wellington, Taipei, Mumbai, and Bangkok all posted gains, while Hong Kong, Singapore, and Jakarta ended lower.
European shares were weaker in early trade, with London, Paris, and Frankfurt all in negative territory.
Investor sentiment was supported by the Fed’s latest Beige Book, which signaled a cooling labor market, reinforcing expectations that the central bank may continue lowering interest rates.
Fed Chair Jerome Powell this week warned that “downside risks to employment appear to have risen,” echoing recent soft economic data.
The prospect of further monetary easing has also bolstered demand for safe-haven assets. Gold surged to a new daily high of $4,242.12 on Thursday, driven by a weaker U.S. dollar and persistent trade concerns.
India’s rupee extended gains following its strongest rally since June, rebounding from near-record lows after intervention from the Reserve Bank of India.
Still, analysts at Bank of America urged caution amid ongoing uncertainty.
“As last week illustrates, risks are not all gone,” the bank said in a note. “Beyond the lack of a clear trade deal with China, there are lingering concerns around inflation, growth, and domestic policy unpredictability, from healthcare to drug pricing.”
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