Markets Cheer Progress in US-China Trade Talks in Switzerland

While a comprehensive trade deal is unlikely in the near term, the prospect of a framework for future negotiations and possible tariff reductions has buoyed investor sentiment and driven a notable move in risk assets.

Constructive language between US and China on trade

The US and China have described “substantial progress” and “material developments” in the discussions. Though specific policy breakthroughs remain elusive, the tone of engagement has shifted markedly. A joint statement is expected at the conclusion of the three-day summit, potentially laying the groundwork for a new phase of dialogue aimed at stabilising trade relations.

While the announcement of a comprehensive trade agreement remains unlikely, investors are hoping for tangible steps forward — particularly on tariff relief. Markets are cautiously optimistic that even a modest rollback in duties could signal a turning point in what has been a period of intense economic and geopolitical friction. Prior to the talks, US President Trump had referenced a reduction in tariffs from the current 145% on non-exempt goods to roughly 80%.

Substance still lags style in trade talks

Despite the upbeat tone, style continues to outweigh substance. Major obstacles remain, and any long-term resolution will require deep structural compromises. Chief among the sticking points are persistent trade imbalances, intellectual property disputes, and the broader strategic rivalry between the world’s two largest economies.

The US continues to express concerns about China’s trade practices, including overproduction and dumping of excess industrial capacity into global markets, as well as alleged currency manipulation aimed at keeping Chinese exports artificially competitive. Another layer of complexity has been added by the US administration’s emphasis on curbing the fentanyl trade — an issue which has been cited by US officials as justification for some of the existing tariffs.

Further, questions remain over the extent to which the US can effectively decouple its economy from China without incurring significant economic costs. Tariffs — some of which exceed 100% and function as de facto embargoes — have disrupted supply chains and raised prices for consumers and businesses on both sides.

The next hurdle: US-China joint statement

Investors are eagerly awaiting details of the joint statement, with particular focus on whether it includes commitments to reduce existing tariffs or sets clear parameters for future engagement. Markets will also be watching closely to see whether the US makes demands for increased Chinese purchases of agricultural goods or greater reciprocity in investment access for US firms.

For Beijing, any move to reduce the current punitive tariffs — including the widely discussed 145% duties on key Chinese exports — would be viewed as a meaningful gesture. Chinese officials have long argued that such measures were excessive and unjustified, effectively freezing bilateral trade in some sectors.

Whether both sides can find a path forward will depend on whether these talks result in a shared understanding of what fair and reciprocal trade looks like, and whether mutual interests can override political pressures, particularly with US elections on the horizon.

Market reaction: Risk-on mood returns

The response in financial markets has been swift and positive. Equity indices across Asia surged, with China-sensitive sectors such as industrials and commodities leading the charge. US equity futures rallied sharply, reflecting improved expectations for global growth and easing trade tensions.

The US dollar also climbed, supported by safe-haven flows into US assets and optimism about the durability of the global trading system. Meanwhile, the Chinese yuan and Australian dollar — both proxies for risk appetite and Asian economic activity — appreciated significantly. In contrast, gold prices dropped over 1.5% as safe-haven demand waned and investor capital rotated back into equities and currencies tied to global trade flows.

This market reaction underscores the extent to which traders had priced in uncertainty and pessimism. The mere signal that talks are productive and that both sides are prepared to re-engage constructively has catalysed a reversal in sentiment — at least for now.

NASDAQ looks poised to break above 200-DMA

The NASDAQ 100 is poised to open above its 200-day moving average and key resistance near 20,350 — a bullish signal that suggests improving momentum. However, the rising wedge pattern indicates potential for a bearish reversal if upside fails to hold. Still, with RSI rising and sentiment buoyed by progress in US-China trade talks, price action appears increasingly constructive. A confirmed breakout could signal further gains, though caution around the wedge pattern remains warranted.

^{(Source: Trading View)}
(Past performance is not a reliable indicator of future results)