After two days of careful diplomatic planning in London, US and Chinese officials concluded a crucial round of trade talks. The result? A tentative revival of the agreement agreed upon last month in Geneva. A soft handshake. And promises to reconnect. China pledged to lift its restrictions on rare earth exports—a sticking point that threatened to unravel the already fraying framework of economic cooperation between the two superpowers.
But if investors were expecting pleasant surprises, they got a flash in the pan. The market’s reaction was muted—in itself telling. Investors had hoped for more. What they got was less escalation, not real progress. The devil, as always, is in the missing details.
A truce without victory
Analysts and traders read the statement for what it was: a pragmatic act. Silence, not a shift. In Hong Kong, Mark Dong, co-founder of a minority asset management firm, interpreted it clearly: “This is positive news for the market. At least now there is a floor that neither side is willing to cross.” This is perhaps the most hopeful outcome—that both countries recognize how much they stand to lose if this trade war escalates again. But the absence of any definitive framework or actionable timetable left markets stuck in limbo. Currency and stock traders gave only a cautious welcome. There was no enthusiasm, just a sigh of relief.
The markets moved, but quietly.
In the hours following the announcement, Chinese stocks rose slightly, with the CSI 300 index rising 0.75% to close at 3,894.63, approaching a three-week high. US stock futures fell slightly. The E-mini S&P 500 (June 2025) contract fell 0.21% to 6,032.25.
The US dollar rose slightly, while the Chinese yuan remained largely unchanged. Chris Weston, head of research at Pepperstone in Australia, summarized the situation aptly:
“For now, as long as the headlines remain positive, risk assets are expected to remain supported. But the lack of reaction suggests this outcome was entirely expected.” In short, markets are watching—but not celebrating.
A Glimpse of the Past: Tariff Shock and Stock Rebound
To understand our current situation, we must go back to April 2nd—a date then-President Donald Trump dubbed “Liberation Day.” At that time, the United States suddenly announced a sweeping new set of tariffs, leading to a sharp decline in global stock markets and sparking fears of a deep economic recession.
The panic did not last long. Trump later reversed most of the punitive measures, giving markets the recovery they had been craving. Since then, the benchmark S&P 500 index has risen 6.5%, approaching new record highs. However, the scars remain—particularly in China, where a weak domestic economy has held back the recovery. Although Chinese stocks have returned to their early April levels, they have underperformed US indices.
The Bigger Picture: A Costly War
This is more than just a headline. The broader consequences of the trade war are being felt across both economies. More than $600 billion in bilateral trade has been affected, with tangible effects: U.S. business confidence has plummeted. Household confidence has weakened. Chinese exports have suffered amid growing deflationary pressures and weak consumer demand. Economists warn that the cumulative impact of these tit-for-tat tariffs, coupled with ongoing market volatility, will negatively impact the global economy for months to come—and perhaps longer.
Philip Wall, chief research officer at Rayliant Global Advisors, put it bluntly: “Investors are underestimating the damage. I’m more cautious and opportunistic than optimistic. A major deal could spark a rebound in stocks – but the euphoria could be short-lived as new risks emerge.”
America’s problems are getting worse
The United States faces challenges that go far beyond the trade dispute. The dollar has fallen more than 8% this year against major currencies. What are the reasons?
Confidence in the US economy is declining.
Ongoing inflation concerns.
Massive financial spending and mounting debt.
The Trump administration—which is grappling with a dispute with Elon Musk, mounting criticism over a controversial tax bill, and immigration protests in Los Angeles—is under pressure on all fronts. Failure to achieve tangible progress on trade with China could further erode economic confidence, both domestically and internationally.
