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Market sentiment has been volatile this week after US President Donald Trump’s renewed threats of 100% tariffs on Chinese goods, retaliating against Beijing’s restrictions on rare-earth exports. Although Trump later softened his tone, the escalation rekindled fears that the fragile trade truce between the world’s two largest economies could fall apart.
Speaking to reporters on Wednesday, Trump confirmed, “We’re in a trade war,” and added that without tariffs, “we would be exposed as being a nothing.” His Treasury Secretary Scott Bessent, however, adopted a more conciliatory tone, suggesting a possible extension of the 90-day tariff suspension if progress is made before the upcoming APEC Summit in South Korea, where Trump and Chinese President Xi Jinping are expected to meet.
Analyst Stephen Innes of SPI Asset Management described the approach as a “good cop, bad cop routine,” noting that markets stay caught between anxiety and relief as negotiations go on.
Following a strong Wall Street session, major Asian indexes, including Tokyo, Hong Kong, Shanghai, Seoul, and Sydney, rose for a second day, supported by hopes that the Fed will act to support slowing growth.
The Fed’s Beige Book report indicated signs of a weakening job market, supporting expectations of additional rate cuts. Fed Chair Jerome Powell earlier this week warned that “downside risks to employment appear to have risen,” reinforcing dovish sentiment among traders.
However, Bank of America economists urged caution, citing ongoing uncertainties over inflation, growth, and US policy direction, noting that “risks are not all gone.”
The renewed trade tensions and rate-cut expectations pushed gold to record highs, reaching $4,234.70 per ounce. Meanwhile, India’s rupee continued its gains after its largest rally since June, supported by central bank intervention, a weaker US dollar, and lower oil prices, according to HDFC Securities’ Dilip Parmar.
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