China-U.S. Trade Truce Ignites Market Frenzy—Just Don’t Ask About the Fine Print

Stocks surge as tariff tensions take a backseat—for now. Wall Street’s latest sugar rush comes courtesy of vague promises and handshake deals. Here’s why traders are buying the hype (again).

Behind the rally: A classic case of ‘bad news fatigue.’ Markets shrugged off months of escalation, betting that even cosmetic progress would trigger algorithmic buying sprees. Spoiler: It worked.

The cynical take: Another volatile week for the ‘buy the rumor, sell the news’ crowd. Meanwhile, crypto markets barely blinked—because when have global trade wars ever followed logical patterns?

China Moves to Protect Its Economy

While waiting for progress at the trade table, China is acting fast to shield its economy. The People’s Bank of China (PBOC) cut its key interest rate by 10 basis points. It also slashed the reserve requirement ratio for banks, unlocking about $138 billion in liquidity. These changes aim to keep money flowing and boost lending.

Policymakers also trimmed mortgage rates and pledged new support for industries like tech and real estate. Auto finance rules are being eased, and new relending tools are in place to boost elderly care and consumption. Still, analysts warn rate cuts alone may not revive credit demand.

“Negotiations between US and Chinese policymakers may take months before agreeing on a potential de-escalation of the tariff war. Amid this global market roller coaster, China sets the tone. This week, the People’s Bank of China’s Governor Pan Gongsheng announced a sweeping 10-basis-point cut to the current seven-day reverse purchase rates from 1.5% to 1.4%. Loans will thus become more attractive to consumers, and the economy will have more liquidity to play with. Playing safe, China braces itself this way for ‘significant but not zero’ US tariffs,” said Dat Tong, Senior Financial Markets Strategist at Exness.

China is preparing more support for small businesses. This reflects concern over slowing growth and the pain caused by U.S. tariffs. The yuan has stabilized, giving the central bank room to cut rates without risking major capital flight.

Trade War Talks in Switzerland Signal Possible Reset

For the first time since the start of the tariff war, top officials from both sides will meet face-to-face. U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are traveling to Switzerland for talks with Chinese Vice Premier He Lifeng. The meeting signals potential progress—but expectations remain low.

China said it agreed to talks after evaluating global pressure and domestic concerns. Still, Beijing insists it won’t compromise on key principles. The U.S. side says the goal isn’t to decouple but to push for fairer trade. Analysts expect no breakthrough yet—but the restart matters.

Switzerland, known for its neutrality, offers a SAFE space for these sensitive discussions. Officials from both countries have previously spoken, but this is the first formal dialogue since tariffs escalated sharply. Even small steps forward could cool market tensions.

Stock Markets Still Volatile Amid Rate Jitters

While hopes for trade-talk progress lifted spirits, investors are watching another major player: the U.S. Federal Reserve. On the same day trade news broke, the Fed was set to announce its latest interest rate decision. Markets expect no rate hike—but all eyes are on Fed Chair Jerome Powell’s comments.

Rising tariffs could fuel inflation, complicating the Fed’s next move. Some fear the U.S. economy is nearing recession territory. Recent corporate earnings show mixed results. Some firms like AMD beat expectations, while others warned of tariff-related headwinds.

Volatility remains high. Despite the jump in futures, Wall Street had just come off a losing streak. Investors remain cautious. Trade war and rate policy are now deeply intertwined.

China’s Policy Shift Boosts Asian Stock Markets

Asian stock markets saw strong gains after China’s stimulus announcement and news of upcoming trade talks. Hong Kong’s Hang Seng index ROSE over 2%, leading the pack. Mainland China’s CSI 300, Japan’s Nikkei 225, and South Korea’s Kospi all posted solid gains.

Investors welcomed China’s interest rate cuts and liquidity injections. The steps suggest Beijing is serious about cushioning its economy against U.S. pressure. Analysts noted that the weakening U.S. dollar also supported Asian currencies and investor sentiment.

The rebound in Asian stock markets shows how tightly tied regional economies are to China’s fate—and to U.S. trade policy. For now, markets are reacting positively to both policy action and diplomatic signals. But uncertainty still hangs over the global economy.