Markets Rise as Trump-Xi Phone Call Sparks Fresh Hopes for US-China Trade Deal

Communication lines reopen and Markets Rise as Trump-Xi Phone Call Sparks Fresh Hopes for US-China Trade Deal. Markets worldwide reacted with cautious optimism after U.S. President Donald Trump and Chinese President Xi Jinping held a long-awaited 90-minute phone call on Thursday. The Trump-Xi call, described by both sides as “very positive,” reopened communication channels to ease prolonged trade tensions between the world’s two largest economies.

In a post on Truth Social, President Trump confirmed that the leaders discussed trade in detail and agreed to resume formal negotiations. Xi, according to Chinese state media, urged the U.S. to roll back “negative measures” related to tariffs and export controls, especially on semiconductors and critical minerals.

Markets Rise as Trump-Xi Phone Call Sparks Fresh Hopes for US-China Trade Deal

Asia-Pacific Markets React with Optimism

Markets across the Asia-Pacific region mostly closed higher on Friday in response to the Trump-Xi call:

• Nikkei 225 (Japan): +0.31%
• Topix (Japan): +0.4%
• Kospi (South Korea): +1.49%
• Kosdaq (South Korea): +0.8%
• ASX 200 (Australia): +0.16%
• CSI 300 (China): Flat
• Hang Seng (Hong Kong): -0.18%

Investors took the resumption of trade talks as a hopeful sign, although geopolitical risks particularly around Taiwan continue to cast a shadow.

Trump Confirms Upcoming Visit to China

During a press event alongside German Chancellor Friedrich Merz, President Trump announced that he had accepted an invitation from President Xi to visit China. Trump also extended an invitation to Xi to visit Washington, though Chinese media acknowledged only the former.

“This is a big step forward,” Trump said. “We’ll be going there with the First Lady. The conversation was very focused on trade.”

This is the first direct communication between the two since Washington imposed sweeping tariffs earlier this year.

Taiwan: The Elephant in the Room

Despite the positive tone, Taiwan emerged as a key point of friction. President Xi reportedly warned Trump to “handle the Taiwan issue prudently,” cautioning that separatist moves on the island could trigger conflict between China and the United States.

This follows recent remarks by U.S. Defense Secretary Pete Hegseth, who called China an “imminent threat” and accused Beijing of preparing for military action in the Taiwan Strait.

Rare Earths and the Geneva Trade Truce

The Trump-Xi call comes amid renewed friction over the fragile Geneva agreement reached last month, where both countries agreed to lower tariffs. Under the deal:

• U.S. tariffs on Chinese goods were reduced from 145% to 30%.
• Chinese tariffs on U.S. goods dropped from 125% to 10%.

Yet both sides accuse the other of not honoring the deal. The U.S. claims China hasn’t resumed exports of rare earth minerals, while China criticizes new U.S. export restrictions on semiconductors and visa bans targeting Chinese students.

Trump, however, reiterated his support for Chinese students coming to the U.S., stating, “It’s an honor to have them. But we want to check them.”

Mixed Reactions in U.S. Markets

While the Trump-Xi call buoyed global optimism, Wall Street ended Thursday with mixed results:

• S&P 500: -0.06%
• Nasdaq: -0.22%
• Dow Jones: +0.15%

Weak labor market data and poor performance from Tesla weighed down tech stocks. Despite these setbacks, some investors now expect the Federal Reserve to adopt a more dovish stance and possibly introduce multiple rate cuts in 2025.

Economic data highlights:

• Jobless claims: Highest since October
• Imports: Down 16.3%
• Trade gap: Narrowest since November 2023
• Challenger layoffs: Up 47% YoY

ADP payrolls: Below expectations

ECB Cuts Rates, Eyes Pause

In Europe, the European Central Bank (ECB) cut its benchmark interest rate by 25 basis points. ECB President Christine Lagarde hinted at a pause in the rate-cutting cycle during the summer.

Market response:

• STOXX 600: +0.16%
• FTSEurofirst 300: +0.19%

Investors welcomed the cut, but gains were capped as the ECB signaled caution due to inflation uncertainty.

Dollar Steady, Bond Yields Fluctuate

The dollar saw a brief surge before retracing on weak job data and dovish central bank commentary:

• Dollar Index: 98.81 (flat)
• Euro: +0.14% at $1.1433
• Yen: Dollar up 0.67% at 143.73

Bond yields were mixed:

• 10-Year U.S. Treasury: +4.395%
• 2-Year Note: +3.928% (Fed rate-sensitive)

30-Year Bond: -4.8856%

Commodities React: Oil Up, Gold Falls, Silver Soars

The renewed U.S.-China engagement triggered a shakeup in commodity markets:

Crude Oil

• U.S. crude: +0.83% to $63.37
• Brent crude: +0.74% to $65.34

Oil prices climbed on the assumption that a de-escalation in trade tensions would support global demand.

Gold

• Spot gold: -0.65% to $3,353.64
• U.S. gold futures: -0.72% to $3,349.20

Gold reversed gains as safe-haven demand eased. Analysts say falling bond yields and soft labor data could still favor gold in the longer term, especially if the Federal Reserve pivots to rate cuts.

Silver and Other Metals

• Silver: +1.9% to $35.61 — highest since 2012
• Platinum: +4.8% to $1,136.45
• Palladium: +0.3% to $1,003.56

“Silver can really gallop, both ways,” said metals trader Tai Wong, noting the metal’s increased volatility amid uncertainty.

Outlook: Fragile Optimism as Clock Ticks on Trade Truce

With a 90-day window to implement the Geneva trade truce, both Washington and Beijing are under pressure to make tangible progress. Commonwealth Bank analyst Luke Yeaman noted, “The agreement to de-escalate tensions shows both countries have an economic pain threshold.”

While the Trump-Xi call eases immediate concerns, deep divisions remain on semiconductors, rare earth exports, and Taiwan. Investors remain cautiously optimistic, but the possibility of renewed escalation is never far off.

Conclusion

The Trump-Xi call may not have solved the trade war overnight, but it has reignited high-level dialogue. As negotiations continue, global markets will remain sensitive to every headline. For now, a fragile sense of hope prevails tempered by the understanding that the path to resolution is anything but smooth.

Also read: US-China Trade Talks Resume in London: High Stakes, Fragile Optimism

Also Read: Trump calls dealmaking with China’s Xi ‘extremely hard’ as frictions rise