The effect of the Trump China trade deal on global markets

Global markets have responded with cautious optimism following the announcement of a “done deal” between the United States and China over raw materials exports. The agreement, which followed two days of negotiations in London, was initially celebrated by US equity markets, though uncertainties surrounding new tariffs have tempered investor sentiment.

US markets saw early gains on Wednesday as news of the deal spread, but these were quickly pared back after President Trump confirmed plans for a 55 per cent tariff on Chinese goods. In response, China announced a retaliatory 10 per cent levy on American imports. The mixed messages regarding tariffs have left the investment community unsure about the long-term implications of the agreement.

President Trump took to his Truth Social platform to declare that the deal would be a “great WIN for both countries,” highlighting that the agreement would facilitate the export of rare earth materials critical for technological industries. Additionally, there are indications that Chinese university students will continue to study at American institutions, fostering educational and cultural ties between the two nations.

Reports suggest Chinese negotiators are considering a six-month cap on rare earth export licences to US carmakers and manufacturers. This would give Beijing the ability to exert further pressure should the US government implement additional tariff measures. The intricacies of this component signal potential volatility in the agreement’s future.

US equity markets reflected this uncertainty, with the S&P 500 and Nasdaq indices closing slightly lower. The FTSE 100, however, fared better, rising by 0.13 per cent and remaining close to its record high earlier this year. Analysts speculate that the truce between the two nations may steady global supply chains if maintained, but much depends on how new tariff policies pan out.

Meanwhile, currency markets saw the dollar weaken further, dropping 0.5 per cent against major currencies and 0.38 per cent against the pound, settling at $1.35. As a result, US government bonds experienced a modest rally, with the yield on 10-year debt falling to 4.35 per cent. These shifts underscore the delicate balance markets are trying to maintain amid conflicting signals from the trade negotiations.

Though the framework of the agreement has been established, further details must be ratified by both President Trump and President Xi in the coming days. The ability of both sides to uphold their commitments will determine whether this agreement can create lasting stability or merely becomes another chapter in the ongoing US-China trade saga.