The wave of optimism that swept across the global financial markets came after a statement made by U.S. President Donald Trump indicating a softening tone in the ongoing U.S.–China trade row. With declarations from the President himself and Treasury Secretary Scott Bessent that tariffs could be rolled back, investors became optimistic that the year-long trade fight could be nearing reconciliation.
Trump: Tariffs will be “substantially” reduced
Speaking from the White House on Tuesday, Trump said Chinese goods tariffs would be reduced “substantially,” but they would not be eradicated. “They won’t be zero,” he added, suggesting that the administration still plans to keep some leverage.
His remarks further echo Treasury Secretary Bessent, who earlier said that the current high tariffs were unsustainable, suggesting a possible way out of this trade conflict. These statements were a breath of relief for investors after months of unease about U.S.-China economic relations.
It also indicated a change in tone toward the Fed
In an Oval Office meeting, Trump also addressed the monetary policy with a softened view toward Federal Reserve Chair Jerome Powell. “I have no intention of firing Powell,” Trump said, encouraging deeper rate cuts. He didn’t show any intention of firing him despite advocating for more aggressive interest rate cuts. This was notably different from previous complaints, including a Truth Social post in which he called Powell “Mr. Too Late, a major loser.”
It reassured the markets on two fronts of fiscal and monetary policy that would be underpinned for the sake of economic stability by the shattering sell-off on Wall Street and the dropping values of U.S. Treasuries on Monday that left global investors a little shaken.
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Markets are upbeat about trade hopes
U.S. stock futures really rallied on this news. The Dow was up 1.13%, the S&P 500 was up 1.51%, and the Nasdaq was up 1.76%. This rally carried with it most of the Asian market, with Hong Kong’s Hang Seng gaining 2.4%, followed by Japan’s Nikkei up 1.91%, and Australia’s ASX200 up 1.41%.
Pointers for a positive opening were on hand, while European markets also appeared to do well. DAX in Germany climbed 2.49%, while Euro Stoxx 50 went up by 1.73%, and the U.K. FTSE 100 went up by 1.1%.
Currency and bond markets rebound
The U.S. dollar index responded more than 1% to the upside, climbing to 99.25 after hitting a three-year low. Haven currencies such as the euro and the Japanese yen were sold off for this strength. U.S. Treasuries rallied as well, with yields on long-dated 10- and 30-year bonds rising as investors cleaned up Monday’s defensive action.
Meanwhile, the two-year Treasury yield, closely watched for interest rate expectations, rose to 3.8% as traders pared back on bets for aggressive rate cuts.
Gold price plummets, Bitcoin bounces
On the back of improving market sentiment, gold was dealt a severe blow. On Comex, gold futures were priced at $3,510 before plunging to $3,355 per ounce, while spot gold shrank more than 4% since Monday’s zenith. Analysts noted the mixed effects of relaxing haven demand and profit-taking on the heels of gold’s recent leap.
Alternately, Bitcoin showed resilience, rising 6.25% to trade on the verge of breaking the $93,400 mark. The cryptocurrency has shown unexpected strength in the face of the wider tech stock sell-off.
Is this the trade war turning point?
The comments found favor in the markets, but analysts remained unconvinced. “There’s still a large degree of uncertainty,” said Pepperstone strategist Michael Brown. Investors are hopeful, but whether this is actually signaling the real beginning of the end of the U.S.-China trade war is still to be seen.
