Global stock markets and the dollar rallied for the second consecutive day after the US treasury secretary touted the possibility of a “big deal” to drastically de-escalate the tariff war with China.
Scott Bessent, President Trump’s most senior economic official, said the White House was willing to sit down and reduce trade imbalances with Beijing, after the administration imposed import levies of 145 per cent on Chinese goods.
Speaking on the sidelines of the International Monetary Fund’s spring meetings in Washington, Bessent said “there is an opportunity for a big deal here” where the US would “rebalance to more manufacturing and less consumption” and China would be “less dependent on export-led manufacturing growth”.
“This is an incredible opportunity … for a beautiful rebalancing,” Bessent said before meetings with Chinese officials this week.
His doveish comments helped boost the value of US and European stocks and the dollar. By the close of trading in New York on Wednesday night the S&P 500 had risen 1.7 per cent to 5,375.86 while the Dow Jones industrial average was up 1.1 per cent to 39,606.57. The Nasdaq Composite enjoyed the best of the session, though, with a gain of 2.5 per cent to 16,708.05 as the dollar strengthened by 0.7 per cent against a basket of major trading currencies.
After the end of normal Wall Street hours, the Financial Times reported that the president is planning to spare carmakers from some of his most onerous tariffs, in another trade war climbdown following intense lobbying by industry executives over recent weeks.
The price of gold, which hit an all-time high of $3,500 this week, retreated $124.50, or 3.7 per cent, to $3,276.30, its worst one-day dollar decline since April 15, 2013. US government bonds, which have been selling off in a sign of fears about the credibility of government policy, also rallied. Yields on 10-year benchmark treasury debt fell by 0.03 percentage points to 4.37 per cent.
American assets gained across the board after speculation that Trump is considering cutting tariffs on Chinese goods by as much as half to 50-65 per cent, The Wall Street Journal reported. Other proposals include the possibility of a smaller 35 per tariff on goods not deemed to be a threat to national security.
“President Trump has been clear: China needs to make a deal with the United States of America. When decisions on tariffs are made, they will come directly from the president. Anything else is just pure speculation,” Kush Desai, a White House spokesman, said.
Scott Bessent and Howard Lutnick, the commerce secretary, flank President Trump
REUTERS
Bessent said a deal depended on the Chinese Communist Party having the “political will” to change its economic model towards domestic spending over export growth.
China’s foreign ministry said: “Our attitude towards the tariff war launched by the US is quite clear. We don’t want to fight, but we are not afraid of it. If we fight, we will fight to the end; if we talk, the door is wide open.”
Risk appetite among investors has returned in the last two trading days after Trump also stepped back from threats to fire Jerome Powell, the head of the US Federal Reserve.
The president said he had “no intention” to remove Powell before his term expired next year. Market turmoil this month has also forced the administration to make conciliatory noises about the chances of a US-China trade deal after the White House raised effective tariffs to the highest in a century.
Analysts at Capital Economics said markets could fall back into the red if the president changed his tune on the Fed or China.
“It is not impossible that [Trump] will change his mind again on trade policy or on Powell’s tenure, which would no doubt trigger renewed sell-offs in financial markets. However, the backpedalling yesterday suggests that he isn’t entirely blind to the potential damage to the economy and to the US’s reputation and credibility,” Hubert de Barochez, senior markets economist at Capital Economics, said.
In Europe, London’s FTSE 100 climbed by 0.9 per cent, or 74.58 points, to 8,403.18 while the more domestically focused FTSE 250 rose 244.81 points, or 1.3 per cent, to 19,483.05. Europe’s pan-European Stoxx 600 of the Continent’s biggest companies was 1.8 per cent higher as Germany’s Dax added 3.14per cent and France’s CAC 40 gained 2.1 per cent.
The pound shed 0.5 per cent against the resurgent dollar to $1.33. But the pound has risen by almost 3 per cent against the dollar since the start of April and more than 6 per cent since the beginning of the year. The euro declined by 0.6 per cent against the US currency to $1.14.
The yield on the benchmark 10-year UK government bond was flat at 4.560 per cent, while the rate on the German equivalent climbed by five basis points to 2.495 per cent.
The head of one of the world’s biggest hedge funds has warned that Trump’s “nonsensical” trade war is damaging America’s brand. Ken Griffin, the billionaire chief executive and founder of Citadel, the hedge fund, said: “The United States was more than just a nation. It’s a brand. It’s a universal brand, whether it’s our culture, our financial strength, our military strength.
• Ken Griffin: Trump’s damage to US brand will take lifetime to fix
“America rose beyond just being a country. It was like an aspiration for most of the world, and we’re eroding that brand right now.”
Griffin cited the sell-off in US treasuries in recent weeks, as Trump’s tariffs increased investor concerns about the “safe haven” status of US sovereign debt, as well as a weakening of the US dollar.
“No brand compared to the brand of the US treasuries — the US treasury market, the strength of the US dollar, the strength of credit worthiness of US treasuries,” he told business leaders and politicians gathered in Washington for Semafor’s World Economy Summit.
