Stock futures surged early Monday as President Donald Trump hinted at a possible cooling of recent trade tensions with China, after fresh tariff threats roiled markets late last week.
“Don’t worry about China, it will all be fine!" Trump wrote Sunday on Truth Social. "Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!”
S&P 500 futures rose as much as 1.6% in pre-market trading Monday, while the Dow Jones Industrial Average and the Nasdaq $NDAQ also made significant gains. Cryptocurrencies, which were also hammered by last week's threats, made a partial recovery, with Bitcoin having tumbled as low as $105,000 last week. But it remained well below a fresh record of $125,000 set just days before.
Trump had threatened Friday to cancel a meeting with Chinese President Xi Jinping scheduled for later in October and proceeded to prepare 100% tariffs on China, ending an economic ceasefire with Beijing and escalating trade tensions anew.
The president cited new Chinese restrictions on rare earth exports that make up critical components in U.S. smartphones, military hardware, autos, and more.
Major indexes on Friday posted their worst one-day performance since the spring following a string of combative comments from Trump toward the Chinese government earlier in the day. Trump is scheduled to meet Xi later this month on the sidelines of the Asia-Pacific Economic Cooperation Summit in South Korea.
Trump’s latest comments on Sunday reignited talk of the so-called TACO (Trump Always Chickens Out) trade among analysts.
“Market participants appear to be leaning into the TACO trade once more, fueled not only by what we’ve seen in the recent past, but also by conciliatory remarks over the weekend from both President Trump and Vice President Vance, suggesting that Friday’s announcement of additional 100% tariffs on Chinese imports are likely to be little more than a negotiating tactic,” Michael Brown, senior research strategist at Pepperstone, said in a note.
Vice President J.D. Vance also positioned the latest flare-up as part of an ongoing negotiation in a Fox News interview. He urged China to “choose the path of reason” and said Washington “has far more cards” than Beijing.
But Vance’s argument looked weaker by Monday morning. Chinese economic data showed overseas shipments growing at the fastest pace since in six months, rising 8.3% year-on-year in September.
The figures indicated a far more resilient export market than economists had predicted, despite a sharp drop in shipments to America, and has “likely emboldened” China in its negotiations with the U.S., said Michelle Lam, China economist at Societe Generale SA, per Bloomberg.
And Beijing also said Sunday that it will retaliate if Trump does not back down on his 100% tariff threat. In a statement reported by the state news agency Xinhua, a spokesperson for the commerce ministry said: “Willful threats of high tariffs are not the right way to get along with China. China’s position on the trade war is consistent. We do not want it, but we are not afraid of it.”