Chinese markets rise as Trump hints of possible deal to avert trade war

trade War De-Escalation Hopes Rise on US-China Deal Possibilities

President Donald Trump‘s recent comments have injected a wave of optimism into the ongoing trade war between the United States and China, leading to a surge in the Chinese Yuan and stock markets. “A trade deal with China is possible,” Trump stated aboard air Force One, emphasizing his positive rapport with Chinese President Xi Jinping. “But remember, he loves China, and I love the USA.So you know, right there, there is a little bit of competitiveness, but the relationship I have with President Xi is, I would say, a great one.”

Easing Trade Tensions

The trade war tensions have been simmering for some time. In early January, Trump enacted a 10% tariff increase on Chinese imports, prompting China to retaliate with tariffs on American coal, LNG, crude oil, farm equipment, and certain vehicles. reports indicate that China initially proposed restoring the Phase One trade deal as a response to these tariffs, coupled with pledges to refrain from devaluing the Yuan and curbing fentanyl precursor exports.

since then, there’s been a notable absence of further escalation. Though, President trump cautioned that retaliation from countries impacted by US tariffs could result in higher export costs for them. He recently paused the planned 25% tariff on Mexico and Canada after they agreed to bolster border controls to combat drug trafficking, specifically fentanyl.

Chinese Yuan and Stock Market Boost

Following Trump’s optimistic remarks, the Chinese Yuan strengthened significantly against the US dollar. The USD/CNH exchange rate,which measures the dollar against the Chinese offshore Yuan,dropped 0.65% to its lowest point since November 2024, briefly touching that level on January 24th. Chinese stock markets also experienced a positive surge. The Hang Seng Index (HSI), a key indicator for the Chinese market, pared earlier losses to close 1.6% lower but remained at a more-than four-month high. It further surged by 2% at the opening of the Hong Kong Stock Exchange on Friday, fueled by positive earnings from Alibaba and the broader positive sentiment.

The HSI, heavily influenced by prominent Chinese tech companies such as Tencent Holdings, Alibaba Group, Xiaomi, and BYD, has been steadily climbing since the launch of deepseek’s AI model, R1, in late January. This model, a competitor to OpenAI’s ChatGPT, is poised to revolutionize various sectors, including the automotive industry, with BYD’s commitment to integrating it into its operations.

AI Innovation Fuels Upward Trajectory

The rise of DeepSeek’s AI model has significantly impacted the overall market sentiment in China. alibaba,the e-commerce giant,outperformed expectations in its latest quarterly earnings,with its AI-driven cloud business experiencing its fastest growth in two years. The company’s shares soared 15% to a three-year high before slightly retracing gains in US trading on Thursday.

This growth highlights the growing influence of AI in China’s economic landscape. The integration of AI into various sectors, from technology to manufacturing, is expected to drive further growth and innovation in the coming years.

Looking Ahead

While recent developments offer a glimmer of hope for a de-escalation in the trade war, the path forward remains uncertain. Further dialog and concrete actions from both the US and China will be crucial to achieving a lasting resolution. The ongoing technological advancements, particularly in AI, are expected to play a notable role in shaping the future of the relationship between these economic superpowers.

Given the recent positive tone from President Trump regarding a potential trade deal with China, what specific actions would Dr. Li Wei consider crucial in determining the outcome of this trade war?

Trade War De-Escalation Hopes: A Conversation with Dr. Li Wei, Chief Economist at the Chinese Academy of Social Sciences

Optimism in the Air

President Trump’s recent remarks have sparked optimism in the ongoing US-China trade war. We sat down with Dr. Li Wei, Chief Economist at the chinese Academy of Social Sciences, to discuss these developments and their potential implications.

Assessing the President’s Comments

Archyde: Dr. Li, President Trump recently stated that a trade deal with China is possible. How do you interpret these comments?

Dr. Li Wei: I believe these comments reflect a shift in tone from the US management. The emphasis on the positive rapport between president Trump and President Xi Jinping suggests a willingness to engage in constructive dialog. However, we must remember that words are just the first step. Concrete actions will be crucial in determining the outcome of this trade war.

Easing Trade Tensions

Archyde: Reports indicate that China has proposed restoring the Phase One trade deal. Do you see this as a sign of de-escalation?

dr. Li Wei: Indeed, China’s proposal to restore the Phase One deal, coupled with pledges to refrain from devaluing the Yuan and curb fentanyl precursor exports, demonstrates a willingness to address US concerns.However, we must wait for the US response to gauge the sincerity and potential success of these proposals.

Market Response and AI Innovation

Archyde: The Chinese Yuan and stock markets have surged following President Trump’s comments. How meaningful is this market response?

Dr. li Wei: The market response is indeed significant. It reflects investor confidence in the possibility of a trade deal and the positive impact it could have on the Chinese economy. Additionally, the launch of DeepSeek’s AI model, R1, has further bolstered market sentiment, given the potential of AI to drive growth and innovation in various sectors.

Looking Ahead: The Role of AI

Archyde: As we look ahead, what role do you see for AI in shaping the future of US-china relations?

Dr. Li Wei: AI could play a significant role in shaping the future of US-China relations. As both countries compete in AI innovation, the one that gains a competitive edge could potentially influence global economic dynamics. Moreover, AI could facilitate cooperation in areas like climate change and healthcare, fostering a more collaborative relationship between the two superpowers.

Final Thoughts

Archyde: Dr. li, what is your final take on the current state of US-China trade relations and the potential for de-escalation?

Dr. Li Wei: I believe we are at a critical juncture. while there are reasons to be optimistic,we must remember that the path to a trade deal is fraught with challenges. Both countries must demonstrate a genuine willingness to compromise and engage in constructive dialogue. The future of US-china relations hangs in the balance, and the decisions made in the coming months will have far-reaching implications for the global economy.