Asian equities experienced a significant surge on Monday, driven by a breakthrough in US-China trade talks. The development has set the stage for leaders Donald Trump and Xi Jinping to finalize a deal, thereby averting an escalation in the world’s biggest trade dispute.
According to US Treasury Secretary Scott Bessent, the threat of an additional 100 percent tariff on Chinese goods is “effectively off the table” following weekend negotiations in Malaysia. Bessent stated, “The tariffs will be averted,” and added that China agreed to delay rare earth export controls and make “substantial” soybean purchases. Chinese Vice Premier He Lifeng described the talks as “candid, in-depth, and constructive,” noting that the two sides reached a “preliminary consensus” on tariffs, export controls, and fentanyl cooperation.
The progress in trade talks has paved the way for Trump and Xi to meet on Thursday in South Korea on the sidelines of the Asia-Pacific Economic Cooperation summit. This meeting will be their first face-to-face encounter since Trump returned to office. Asian shares rose in early trade, with stocks in Japan and South Korea jumping about two percent and breaching milestones. Hong Kong, Shanghai, and Taipei also opened on a positive note.
The positive sentiment follows a strong finish on Wall Street on Friday, after benign US inflation data set the stage for another Federal Reserve interest rate cut. Trump expressed confidence about reaching a comprehensive agreement with Beijing, stating, “They want to make a deal and we want to make a deal.” The Republican president is currently on a five-day Asia tour, with trade deals topping the agenda at every destination.
Futures for US copper surged on the trade deal optimism, bolstering the outlook for global demand. The breakthrough came after months of escalating tensions, with Trump threatening a massive tariff hike in response to China’s October expansion of rare earth export controls. Under the framework deal, China would defer its rare earth restrictions “for a year while they reexamine it,” according to Bessent.
Key market figures at around 0230 GMT included the Tokyo Nikkei 225, which rose 2.1 percent to 50,321.49, and the Hong Kong Hang Seng Index, which increased 1 percent to 26,425.51. The Shanghai Composite also rose 0.9 percent to 3,985.83. Oil prices edged up, with West Texas Intermediate rising 0.2 percent to $61.62 per barrel and Brent North Sea Crude increasing 0.2 percent to $66.09 per barrel.
The development in US-China trade talks is significant, as it could lead to a comprehensive agreement and ease tensions between the world’s two largest economies. The upcoming meeting between Trump and Xi is expected to be crucial in finalizing the deal and averting further escalation in the trade dispute. As the trade talks progress, global markets will likely remain vigilant, watching for any signs of a breakthrough or potential setbacks.