The administration then signaled an openness Sunday to a deal with China with Trump hinting at a possible off-ramp for Xi, while issuing a veiled threat that a full trade war would wound China.
That suggests the US wants to keep up the pressure on China to reverse its most recent trade moves, while trying to reassure spooked markets that a tit-for-tat escalation isn’t inevitable.
China responded saying the US should stop threatening it with higher tariffs and urged further negotiations to resolve outstanding trade issues, adding it will not hesitate to retaliate should Washington persist in its measures against Beijing.
Chinese equities meanwhile have been one of the world’s best performers. Hong Kong’s Hang Seng Index has climbed 31% in 2025 as they benefited from the trade truce with the US in addition to optimism over the country’s growing heft in AI. Alibaba Group Holding Ltd. has surged more than 100%, with Tencent Holdings Ltd. up almost 60%.
“Markets are now debating whether this latest tariff salvo will materialize,” Dilin Wu, a strategist at Pepperstone Group wrote in a note. “If it’s a negotiating ploy, the current pullback may prove a buy-the-dip opportunity. But if tariffs take effect, a fresh wave of volatility and global risk repricing could follow.”
In European news, French President Emmanuel Macron announced a new cabinet Sunday as pressure builds for him and his reappointed prime minister, Sebastien Lecornu, to head off France’s growing political crisis and pass a budget. French bond futures opened lower.
