Global Markets Rally as U.S.-China Trade Talks Resume and China Cuts Rates

Investors worldwide cheered a wave of optimistic news this week: the U.S. and China have agreed to restart high-level trade negotiations, while China simultaneously announced a new round of monetary easing. Asian equity markets surged in response, signaling a clear shift in investor sentiment and a more hopeful outlook on global economic prospects.

According to a statement from the U.S. government, Treasury Secretary Scott Bessant and Trade Representative Jamison Greer will meet Chinese Vice Premier He Lifeng in Switzerland starting May 9 for three days of face-to-face talks. This marks the first official diplomatic engagement since the U.S. raised tariffs on Chinese goods back in February, reviving market hopes for a potential cooling of trade tensions.

Tariffs between the two countries have reached unprecedented levels. The U.S. now imposes average tariffs of 145% on Chinese imports, while China has countered with a 125% rate on goods from the U.S. Although narrow exemptions exist for sectors like semiconductors and medical supplies, the broader trade environment remains tense—impacting global supply chains and corporate investment strategies. U.S. officials have acknowledged that current tariffs functionally resemble a trade embargo, urging a return to a fair and balanced framework. China, while open to dialogue, asserts that its core interests will not be compromised under foreign pressure.

In parallel, China’s central bank unveiled major measures to boost liquidity and support economic growth. People’s Bank of China Governor Pan Gongsheng announced a cut in the 7-day reverse repo rate to 1.4%, alongside reductions in the Standing Lending Facility (SLF) rate and the reserve requirement ratio (RRR). These moves aim to ease financing costs for businesses and stabilize the broader economy. Additionally, mortgage rates for first-time homebuyers have been lowered from 2.85% to 2.6%, a significant step toward supporting the housing market and reviving domestic demand. Analysts view these measures as China’s strongest policy intervention in over a year.

Markets responded favorably. On Wednesday, the Nikkei 225 rebounded over 6%, recovering from the previous day’s losses. The Hang Seng Index rose 1%, and Shanghai’s benchmark gained 1.4%, reversing a recent wave of panic selling. Markets in Korea, Australia, and India also posted gains, reflecting investor optimism toward both policy shifts and trade dialogue. Meanwhile, European and U.S. futures extended their upward momentum during Asian trading, pointing to renewed risk appetite globally.

Still, analysts caution against overconfidence. Although recent developments have buoyed markets, deep divisions remain between Washington and Beijing on key issues such as industrial subsidies, intellectual property rights, and tariff baselines. Some forecasts suggest that even a partial rollback of tariffs to around 60% would represent a major milestone, but durable, structural solutions will likely require prolonged negotiations.

Moreover, China’s domestic data remains soft. April’s manufacturing PMI contracted for a third straight month, consumer demand is weak, and real estate companies are under considerable debt pressure. Many expect the central bank may need to further ease policy to sustain growth. On the U.S. side, inflation remains stubbornly high, with March CPI surpassing expectations. This leaves the Federal Reserve facing a delicate balance between controlling prices and maintaining economic momentum—especially with tariff uncertainty looming.

Ultimately, the rebooted U.S.-China talks are about more than trade—they represent a critical test for global market stability and investor confidence. While the immediate bounce in stock markets is encouraging, the true turning point will hinge on whether both sides can find common ground on substantive issues and take the first step toward lasting economic détente.