Gold slips on progress of US-China trade deal; stocks surged
·
Trump may also withdraw 20% additional Fentanyl
tariffs against China's similar tariffs on US soybeans, and subsequent purchase
·
China will likely withdraw its REM export
restrictions on the US, selectively, against the removal of AI Chip
restrictions
On October 25-26, 2025, US and Chinese negotiators
held high-level trade talks in Kuala Lumpur, Malaysia, on the sidelines of the
ASEAN summit. This marked the fifth round of discussions this year, focusing on
de-escalating the ongoing trade tensions that have escalated under President
Trump's administration. The talks were led by US Treasury Secretary Bessent and
Trade Representative (USTR) Greer on the American side, and China's Vice Premier
Li Chenggang as the lead negotiator. Key issues included tariffs, intellectual
property protections, market access, and supply chain normalization for
critical minerals.
Key
Outcomes from the Talks
v Framework
Agreement Reached: Both sides
announced a "preliminary consensus" or "framework" for
addressing bilateral trade concerns. This includes commitments to reduce or
avert a proposed 157% tariff on Chinese goods, which could have severely
impacted global supply chains. US officials described the discussions as
"constructive, far-reaching, and in-depth," while Chinese
representatives noted progress despite the US maintaining a "tough
stance."
v Progress on
Specific Areas: Agreements were
signaled on diversifying critical minerals supply chains, with separate US
deals signed with Australia, Malaysia, and Thailand, just days before Talks
with China to bolster alternatives to Chinese dominance in rare earths and
battery materials. Broader topics like TikTok's US operations and technology
transfers were also on the agenda.
Potential
Trade Deal and Next Steps
v Path to
Finalization: The framework
sets the stage for a potential comprehensive deal to be sealed at an upcoming
summit between President Trump and Chinese President Xi Jinping, expected later
this week—possibly as early as Friday. This would be their first in-person
meeting since 2019, raising hopes for a thaw in relations amid fears of a
renewed trade war.
v Implications: A deal could stabilize global markets by easing
tariffs, boosting US exports to China (e.g., agricultural goods and energy),
and addressing US concerns over subsidies and IP theft. However, analysts
caution that internal approvals and geopolitical factors (e.g., Taiwan
tensions) could complicate ratification. Trump has publicly stated the sides
are "poised to come away with" an agreement, signaling optimism.
Wall Street Futures surged to a fresh
life time high early Monday Asian Session on hopes of US-China Trade Deal 2.0. On
Sunday, top U.S. and Chinese negotiators said they reached a consensus on key
disputes, paving the way for Presidents Trump and Xi to meet later this week in
South Korea and finalize a trade deal aimed at easing tensions. Gold slips on
easing of Trump trade war tantrum.
After
two days of talks in Malaysia, officials announced that both sides had agreed
on issues including export controls, fentanyl, and shipping levies. U.S. Treasury Secretary Scott Bessent
said Trump’s threat of 100% tariffs on Chinese goods “is effectively off the
table,” adding that China would make “substantial” soybean purchases and delay
its rare-earth export controls “for a year while they re-examine it.” He said
the leaders are expected to extend the tariff truce, resolve differences over
TikTok, and secure rare-earth supplies vital to high-tech industries. Bessent
also noted that Trump and Xi plan to discuss a global peace initiative, with
Trump hoping to enlist Xi’s help in ending Russia’s war in Ukraine.
Scott Bessent's Comments on US-China
Trade Talks – October 26, 2025
On
October 26, 2025, US Treasury Secretary Scott Bessent appeared on a series of
Sunday morning political talk shows across ABC, CBS, and NBC to discuss the
outcomes of the high-level US-China trade talks held in Kuala Lumpur, Malaysia.
He described the negotiations as "very good" and productive,
emphasizing a reached "substantial framework" that averts immediate
escalations like new tariffs and sets the stage for a leaders' summit between
President Donald Trump and Chinese President Xi Jinping in South Korea later
that week.
ABC News: Bessent
highlighted optimism for agricultural exports and a delay in China's rare earth
export controls, framing the framework as a major step toward de-escalation.
v On the overall framework:
"I think we’ve reached a substantial framework for the two leaders who
will meet in Korea next Thursday."
v On US soybean farmers:
"U.S. soybean farmers will feel very good about what's going on both for
this season and the coming seasons for several years once the deal's terms are
announced."
v On China's rare earth threats:
"They are going to delay that for a year while they reexamine it."
v Broader context:
He noted the talks eliminated the threat of Trump's proposed 100% tariffs on
Chinese imports starting November 1, calling the discussions
"constructive, far-reaching, and in-depth."
CBS News: Bessent credited the Trump
tariff threat as leverage and detailed concessions on fentanyl precursors and
agriculture, while downplaying media skepticism on prior soybean purchases.
v On the talks' success:
"I think we had a very good two-day meeting... I believe that that
[additional 100% tariff] is effectively off the table."
v On tariff leverage:
"President Trump... decided that it would be a good idea for him to
threaten a 100% additional tariff, and it did give us a great deal of
leverage."
v On agriculture and fentanyl:
"We also agreed on substantial agriculture purchases for U.S. farmers. We
agreed that the Chinese would begin to help us with the precursor chemicals for
this terrible fentanyl epidemic."
v On prior Argentia-China soybean deals:
"Those soybeans were always going to get purchased. They just did it at a
time when the Argentines had lifted their export taxes."
NBC News: Bessent
focused on the framework enabling leader-level decisions, including potential
future summits, and reiterated the deferral of escalatory measures.
v On the framework's purpose:
"The framework reached in Kuala Lumpur, Malaysia, will allow President
Donald Trump and Chinese President Xi Jinping to discuss further trade
cooperation next week."
v On avoiding tariffs:
"No, I'm not [anticipating the U.S. would proceed with Trump's threat of
100% tariffs on Chinese goods]."
v On rare earths deferral:
"I'm also anticipating that we will get some kind of a deferral on the
rare earth export controls that the Chinese had discussed."
v On leaders' meeting:
"I believe that we have the framework for the two leaders to have a very
productive meeting for both sides."He also suggested Trump might visit Xi
in Beijing early next year, ahead of the Lunar New Year.
In
summary, these comments reflect a consistent message of progress without
overpromising finality, with the framework addressing tariffs, rare earths,
agriculture, and fentanyl precursors. Bessent avoided specifics on TikTok or
other tech issues, deferring to the Trump-Xi summit.
Trump's Comments on US-China Trade
Talks: October 26-27, 2025
President
Donald Trump made several optimistic remarks about the US-China trade talks
during and immediately after the negotiations in Kuala Lumpur, Malaysia, on
October 26, 2025. These comments were primarily shared with reporters at the ASEAN
summit, aboard Air Force One en route to Japan on October 27, and in reference
to future meetings. Trump emphasized progress toward a deal, his respect for
Chinese President Xi Jinping, and plans for ongoing engagements, while avoiding
detailed interviews on Sunday morning shows (where Treasury Secretary Scott
Bessent appeared instead).
At the ASEAN Summit in Kuala Lumpur
(October 26)
Trump
addressed reporters after the trade talks concluded, striking a positive tone
on the framework agreement reached by negotiators.
v On securing a deal:
"I think we’re going to have a deal with China."
v On future meetings with Xi:
"We’ve agreed to meet. We’re going to meet them later in China, and we're
going to meet in the U.S., in either Washington or at Mar-a-Lago." He
highlighted priorities like Chinese purchases of US agricultural products in
these discussions.
Aboard Air Force One En Route to Japan
(October 27)
While
departing Malaysia for the next leg of his Asia tour, Trump spoke to reporters
about the upcoming summit with Xi in South Korea on October 30, expressing
confidence in finalizing an agreement.
v On the potential outcome:
"I've got a lot of respect for President Xi and I think we’re going to
come away with a deal."
Trump's
comments aligned with the broader narrative of de-escalation, building on the
"preliminary consensus" from the Malaysia talks, which addressed tariffs,
rare earth export controls, fentanyl precursors, and agricultural purchases. He
did not appear on ABC, CBS, or NBC's Sunday shows on October 26; those featured
Bessent discussing the framework's details.
China's Official Comments on US-China
Trade Talks in Malaysia – October 25-27, 2025
Following
the conclusion of the two-day trade talks in Kuala Lumpur, Malaysia, on October
26, 2025, Chinese officials issued measured statements emphasizing constructive
dialogue, preliminary progress, and the need for mutual respect to stabilize
bilateral relations. These remarks, primarily from Vice Premier He Lifeng and
International Trade Representative (CITR) Li Chenggang, were shared through
official channels like the Ministry of Commerce (MOFCOM) and state media. They
align with the U.S. description of a "framework agreement" but stress
China's firm defense of its interests amid U.S. "tough stances."
Pre-Talks Announcement (October 23-24): China's Ministry of
Commerce confirmed the talks via a formal statement, framing them as a mutual
effort to address "important issues" in bilateral trade.
v MOFCOM Statement:
"Upon agreement between China and the United States, He Lifeng... will
lead a delegation to Malaysia from October 24 to 27, 2025, to hold economic and
trade consultations with the US side." The ministry highlighted the goal
of de-escalating tensions, noting the talks would overlap with the ASEAN summit
and precede the Trump-Xi meeting.
During the Talks (October 25): As
negotiations began, officials underscored candid exchanges on core issues like
tariffs, export controls, and fentanyl.
v On starting discussions,
Li Chenggang described the opening session as "in-depth and candid,"
with the Chinese delegation arriving focused on "properly addressing each
other's concerns."
Post-Talks Statements (October 26-27):
After
wrapping up, Chinese representatives announced a "preliminary
consensus" on several fronts, while calling for internal approvals and
leader-level finalization. He Lifeng's remarks, echoed in state media,
emphasized win-win cooperation.
v Vice Premier He Lifeng's Summary:
"The essence of China-U.S. economic and trade relations is mutual benefit
and win-win results, and the two countries gain from cooperation and lose from
confrontation." He noted "candid, in-depth and constructive
exchanges" on topics including U.S. Section 301 tariffs on Chinese
maritime/logistics/shipbuilding sectors, tariff suspension extensions, fentanyl
cooperation, agricultural trade, and export controls. He urged the U.S. to
"build mutual trust, manage differences, expand mutually beneficial
cooperation," adding that stable relations "serve the shared
interests of both countries... and meet the expectations of the international
community."
International Trade Representative Li
Chenggang's Briefing: "The two sides reached a preliminary
consensus on addressing respective concerns," including export controls,
fentanyl-related tariffs, agricultural purchases, and shipping levies. Li
acknowledged the U.S. "maintained a tough stance" but affirmed
China's resolve to "stay firm in defending its interests and rights."
He stated the sides would "work out specific details and follow the
domestic approval processes," paving the way for the Trump-Xi summit.
On Broader Principles:
Both officials reiterated that differences should be handled via "mutual
respect, peaceful coexistence, and win-win cooperation," with dialogue on
"equal footing." A senior official added that "recent
volatility... is not what Beijing wants to see," and both sides agreed to
use the consultation mechanism for "healthy, stable, and sustainable
development."
As per China, both
sides stood firm (giving face to everyone); eventually, they agreed on a
preliminary consensus, but awaited superior approval. If approved, Xi and Trump
can meet in South Korea:
Discussions include
·
Export control concerns (likely address
concerns such as expediting approval channel, but unlikely China will remove
this unless the US removes tech control)
·
Extension of suspension of the reciprocal
tariff (looks like another 90-day extension)
·
Fentanyl and anti-drug cooperation (this
led to a 20% tariff on Chinese products and China's retaliation with a 10-15%
tariff on US energy and agricultural imports. If the US removes the 20% tariff,
China will do the same, opening the door for soybean imports from the US, a key
political concern for Trump
·
Expansion of bilateral trade (this is
completely new. Expanding trade while trade between the 2 shrinking fast
·
A 301 investigation on vessel fee
(US-imposed vessel fee on Chinese ships based on a toolbox developed by former
USTR Katherine Tai, China retaliated.
Li Chenggang, China’s Vice Minister of Commerce and
International Trade Negotiation Representative, stated on October 26 that China
and the US held constructive discussions over a range of critical topics during
more than a day of intense negotiations. The agenda included export control
concerns from both sides, extending the suspension period for reciprocal
tariffs, issues related to fentanyl tariffs and anti-drug cooperation, further
expansion of bilateral trade, and US measures under Section 301 concerning
vessel fees; while the US maintained a tough stance, China firmly defended its
interests. Both sides explored practical solutions to address mutual concerns
and reached a preliminary consensus on the discussed issues. The next step will
involve internal approval procedures by each party.
Additional
Context from State Media
·
China Daily Editorial (October 26): "The latest round... demonstrated that
dialogue and negotiation are the only effective way to manage differences and
stabilize trade relations."
·
Response to U.S. Tariff Inquiry (October 25): The Chinese Embassy in Washington "strongly
opposed" a new U.S. probe into China's Phase One compliance, calling it
"false accusations."
These comments reflect cautious optimism, avoiding
overcommitment while aligning with the framework for Trump-Xi discussions in
South Korea on October 30.
Conclusions:
As a part of US-China trade deal 2.0, Trump may
withdraw the 20% Fentanyl tariffs on China against China’s similar tariffs on
US soybeans and purchase of the same. The US and China, the two largest
economies in the world, which constitute almost half of the global GDP, need
each other for prosperity and development. Both countries are seeking strategic
de-risking, but not complete decoupling. But China is much ahead in strategic
de-risking, while the US may have just started the process, and may take
another 10-15 years for any meaningful progress.
China has taken a hard lesson from the Trump 1.0
trade war episode, and thus, it's no longer proactively approaching the Trump
admin for any trade deal at gunpoint. China is forcing the US trade negotiating
team to meet in a 3rd country, avoiding the Trump 1.0 era like a
marathon China trade deal talks soap opera. China is now almost fully
independent of AI/High-end chips and other techs, while the US has just started
the process of Rare Earth Materials (REMs) with some JVs with Australia, Malaysia,
and Thailand. The US is still hugely dependent on the Chinese supply chain
directly or indirectly, but the opposite is not true.
Market wrap
Wall Street
surged on hopes of an imminent US-China trade deal; Gold slips on risk-appetite
The U.S. stock market soared to new heights, driven
by optimism surrounding a potential U.S.-China trade deal and anticipation for
key economic events. The S&P 500 climbed 1.3% to close above 6,800 for the
first time, the Nasdaq surged 1.9%, and the Dow Jones Industrial Average rose
350 points, approximately 0.7%, all hitting record highs. This rally was
spurred by Treasury Secretary Scott Bessent’s announcement of a “very successful
framework” for trade discussions between Presidents Trump and Xi Jinping, set
for Thursday, which could delay China’s rare-earth export restrictions, avert
planned 100% U.S. tariffs, and resume Chinese soybean purchases.
Technology stocks led the charge, with
semiconductor companies at the forefront. Nvidia gained 2.1%, Broadcom rose
2.4%, and Qualcomm jumped 9.5% after announcing new AI processors for
data-center workloads, signaling a strategic pivot that expanded its market
potential. Tesla advanced 4.2%, bolstered by positive sentiment around its
growth, while Apple added 1.3% as it neared a $4 trillion market cap.
Chip names led the session, Nvidia, Broadcom, and
Qualcomm surged after unveiling new AI processors aimed at data-center workloads,
a product pivot that sent the stock to fresh highs as investors repriced its
addressable market and near-term revenue potential. Tesla and Apple gained,
while investors also prepared for a heavy calendar this week with Q3 results
from Alphabet, Amazon, Apple, Meta, and Microsoft, and a widely expected 25 bps
Fed cut on Wednesday.
Investors are also focused on a busy week ahead,
with third-quarter earnings from major tech firms—Alphabet, Meta, and Microsoft
on Wednesday, followed by Apple and Amazon on Thursday. These reports are
critical, as the “Magnificent Seven” tech giants are expected to drive
significant earnings growth for the S&P 500, with analysts projecting a
7.5% increase for Q3 2025.
However, risks remain- any breakdown in U.S.-China trade
talks or disappointing earnings could trigger volatility, with a potential
10–11% pullback. For now, the combination of trade deal hopes, strong tech
performance, and expected monetary easing keeps the market bullish, with the
S&P 500 up 3.07% over the past month and 17.89% year-over-year as of
October 27, 2025.
Technical
outlook: DJ-30, NQ-100, SPX-500 and Gold
Looking
ahead, whatever may be the narrative, technically Dow Future (CMP: 47700) now has to sustain over 48000 for a
further rally to 48300 and 48600/49000-49700/50000 in the coming days;
otherwise sustaining below 47900-47700, DJ-30 may fall to 47200/47000-46500/46200
and further 45500/44950-44500/44200 and 43500 in the coming days.
Similarly,
NQ-100 Future (25800) now has
to sustain over 26100 for a further rally to 26200-26500 in the coming days;
otherwise, sustaining below 25750, NQ-100 may fall to
25300/25000-24700/24500-24300/24300 and 23700/23400/23000 and 22600/22400 in
the coming days.
Looking at
the chart, technically SPX-500
(CMP: 6880) now has to sustain over 7050-7100 for a further rally to
7200/7300-7500/8300 in the coming days; otherwise, sustaining below
7000/6900-6800/6750, may fall to 6650/6595 and 6490/6450-6375/6300-6250/6200
and further fall to 6080 in the coming days.
Looking at
the chart, Technically Gold (CMP:
$4365) has to sustain over 4395-4405 for 4425/4455-4475/4500 to 4555-4575 and
even 5000 zone in the coming days; otherwise sustaining below 4385, Gold may
again fall to 4275/4200-4045/4100 and 4000/3925-3890/3770 and
3700/3600-3500/3450 and 3350 levels in the coming weeks.
