China waves back: The first olive branch lands, but the peace pipe is still missing
|China’s Commerce Ministry just lobbed the first olive branch of the tariff showdown, confirming that Washington “through multiple channels” has quietly signalled a willingness to talk. Beijing says it’s now “evaluating” whether to reopen negotiations—an overture we haven’t seen since Trump cranked tariffs to century-high levels.
Futures immediately sniffed the shift: S&P contracts ripped off their early losses, the offshore yuan ticked stronger and even the Aussie dollar—our favourite China proxy—picked up steam.
On paper, both capitals are waving détente flags: U.S. officials insist the ball’s in Xi’s court, while China demands “sincerity” (read: ditch the 145% levies) before settling in for serious talks. But dig a layer deeper, and the path is still littered with landmines. China’s pledge to fight “to the end” wasn’t retired—just shoved behind softer sound-bites—and the “cancel duties first” stick remains a non-starter for the White House.
That nuance shows up in price action. Risk assets scored a relief rally but not blowing off any tops. In other words, traders are happy to buy the dips but won’t bet the house on a clean breakthrough.
Now add another wrinkle: Trump’s surprise reshuffle gives Marco Rubio dual control over state and national security—a move Beijing views with deep suspicion. Any thaw in the trade channel could be counter-punched with tougher rhetoric on Taiwan or the South China Sea. In short, one channel may warm even as the other freezes up.
Markets are right to pencil in a tentative thaw, but this olive branch still feels more like a walking stick than a peace pipe. The next macro data drop—especially U.S. payrolls—will determine whether these negotiations blossom or break off entirely. Keep the convexity on; the tape still favours headline scalpers over conviction trend-followers.
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