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.