Trump’s tone on China hands risk-on baton to Asia in friendly, optimistic fashion

As important as the U.K. deal was, Trump’s tone on China was the real signal for markets—and it handed the risk-on baton straight to Asia in a friendly, optimistic fashion. The president all but greenlit the idea that the days of punitive standoff might give way to negotiated momentum. In his words: “You can’t get any higher. It’s at 145%. So we know it’s coming down.”

That was the tape's cue.

Markets rallied hard on the optics—S&P tagged session highs, and havens like Treasuries and gold gave up ground. The setup now is simple: if this weekend’s talks in Switzerland between Bessent, Greer, and He Lifeng deliver even whispers of progress, tariff rollback becomes an investible reality, not just political theatre.

And the market’s already sniffing it out. The idea that China might "buy peace" by stepping back into Trade War 1.0 compliance—starting with U.S. goods absorption—opens the door for Phase 2: overcapacity, tech guardrails, and real structural rebalancing. The roadmap to détente isn’t smooth, but it’s real—and soon it could be on the table.

Trump even layered in the domestic tailwind, pointing to extended tax cuts and bullish policy alignment. “You better go out and buy stocks,” he said, just before the S&P ramped another 1.5%. Whether it’s bravado or bait, the market doesn’t care. It trades the tone, and today’s tone was all-in on growth.

Sure, the China talks are still fraught. Trump plans to bring up the Jimmy Lai case—an obvious red rag for Beijing—and even tossed out threats against companies like Mattel for passing along tariff costs. But these are just tactical jabs within a broader negotiation arc. Underneath it all, Trump signaled a path forward, and that was enough to push markets into rally mode.

When Washington shifts from confrontation to deal-making, and the message is “tariffs will come down,” that’s a tradable inflection point. The UK deal was the proof-of-concept. China is the main event.

Traders don’t view trade deals as binary wins—they price them through a probabilistic lens. Britain’s agreement with the U.S. isn’t groundbreaking in absolute terms, but from a market perspective, the optics are golden. Two long-time allies—who, let’s be honest, would never turn their back on each other in a real fight—are now publicly locking arms on trade. That sends a message.

It’s not just about tariff tweaks on autos and beef—it’s about breaking the fog of uncertainty. When a G7 partner steps up to ink a deal while China is still pumping stimulus into soft PMIs and industrial slack, markets notice. The U.K. deal adds weight to the idea that Trump can stack up bilateral wins—and that gives the broader trade narrative legs.

The more deals that land on the table, the higher the odds that China eventually gets pulled back into the rules of engagement from Trade War 1.0—starting with the basics: buy more U.S. goods, even if they have to choke it down. Only then can the real negotiations on overcapacity begin—Trade War 2.0.

If that ball gets rolling, markets will finally see the outlines of a roadmap to détente. A bumpy one, no doubt—this isn’t kumbaya territory—but it’s still a detente. And even a jagged path forward is enough to reprice risk for a market that’s been trading ambiguity for the better part of the year.

In short, Britain just gave the market something it loves—structure over sloganeering. And when structure replaces ambiguity, risk flows don’t wait around.