Wall Street gained further on hopes of Trump and Fed pivot

·       Trump signals back-channel trade talks with China, while China is also easing various non-tariff barriers despite officially denying any trade talks

·       Trump is blinking fast as China almost stopped the supply of rare earth materials to the US, vital for US tech and defense industry

·       Trump will also meet many World Leaders in Rome on Friday on trade, which may be positive

·       Fed’s Hammack indicated June rate cuts, while Waller stressed Trump tariffs clarity after July and any rate cut in September-December’25

On Wednesday, April 23, 2024, Wall Street Futures surged on hopes of Trump’s reconciliation with Fed Chair Powell and China. Trump indicated that by his bellicose Truths, he never meant to terminate Fed Chair Powell, but he still maintains that the Fed should cut sooner rather than later as there is no inflation. For China, Trump reiterated his ‘good friendship relation’ with Chinese President Xi and virtually waved the ‘white flag’ for China to avoid an all-out trade war.

Trump and his admin indicated that the US is open to drastically reducing tariffs on China, provided China is also ready to reciprocate the same. The US will not cut Chinese tariffs unilaterally unless China also reciprocates and assures the US about that. China tariffs could come down from their current level of 145% to between 50% and 65%, almost half. Trump said "It depends on China” how soon the tariffs can come down.

Trump signaled Wednesday that the US is going to have a fair deal with China, adding that the country may receive a new tariff rate in the next two to three weeks. Bessent tempered some of the optimism over that development, as he said the US was not looking to unilaterally lower tariffs and that a full trade deal could take two to three years.

Trump is blinking first on China trade war

On April 23, 2025, President Trump made several comments about tariffs and China during a White House press conference following the signing of multiple executive orders. Trump indicated that the U.S. was in daily back-channel contact with China to negotiate a potential trade deal, but he did not disclose how close they were to reaching an agreement. He emphasized a hardline stance, suggesting that if no deal was reached with China or other countries within a short timeframe (two to three weeks), he would decide on the tariffs to impose. This aligns with his broader tariff strategy, which included maintaining high tariffs on Chinese imports, with rates at 145% (including a 125% reciprocal tariff, a 20% fentanyl-related tariff, and additional Section 301 tariffs).

But stressed-looking Trump also softened his tone slightly compared to earlier statements, expressing a willingness to negotiate, while maintaining that China’s trade practices needed to align with U.S. interests. Trump’s comments reflected his administration’s position that China’s retaliatory tariffs (raised to 125% on U.S. goods) were unsustainable, and he reiterated that the U.S. would not unilaterally reduce tariffs on China without a deal.

These remarks came in the context of recent executive actions, including a 90-day pause on tariffs for most countries (except China) announced on April 9, and ongoing efforts to pressure China into trade negotiations. Trump’s statements underscored his belief that high tariffs would force China to the table, though Chinese officials denied active talks, calling such claims “fake news” and insisting on equal-footed negotiations. On Thursday, April 24, 2025, China’s Foreign Ministry spokesperson this tariff war was unilaterally initiated by the US and thus the US has to take the initiative first for any truce.

China is ready to reciprocate any Trump tariff cuts despite officially denying back-channel talks

China's response to President Trump's April 23, 2025, comments on tariffs and trade negotiations was sharp and defiant, reflecting Beijing's hardened stance. On April 24, the Chinese Foreign Ministry stated, “The U.S. cannot say it wants an agreement, while on the other hand continuing to exert a maximum pressure campaign… China does not want a trade war but is not afraid if the U.S. does”.

Beijing has consistently dismissed Trump’s tariff strategy as “a joke” and accused the U.S. of economic bullying, with Commerce Ministry spokesman He Yadong on April 17 demanding the U.S. “thoroughly remove all unilateral tariffs” and denying reports of ongoing negotiations as “groundless”. China’s finance ministry also signaled it would not match further U.S. tariff hikes, indicating a strategic pause after its 125% levy, as trade between the two nations has become nearly unfeasible.

Beyond tariffs, China has employed non-tariff measures, such as adding 11 U.S. companies to an “unreliable entities” list, restricting their access to Chinese goods with potential military uses, and issuing a travel advisory cautioning citizens against visiting the U.S. due to deteriorating trade relations. Diplomatically, China has sought to rally other nations, with Xi Jinping inviting the EU and Southeast Asian countries like Vietnam and Malaysia to resist “unilateral U.S. bullying,” though these efforts have met mixed responses.

Chinese state media, like People’s Daily, has emphasized domestic resilience, urging citizens to focus on expanding domestic demand as a long-term strategy to counter U.S. tariffs. Beijing’s leadership believes its economy, bolstered by seven years of reduced reliance on the U.S., can withstand the trade war. China is relying on increasing pressure on Wall Street, Main Street and also Capitol Hill on Trump for his bellicose tariff policies; Trump will blink first.

However, China has left the door slightly open for negotiations, insisting they must be on “equal footing” and based on mutual respect. China also pressurizing the US by restricting or even almost stopping exports of vital rare earth materials to the US, something which may hurt US tech and defense industry seriously. While China is also allowing various sections of the economy for private sectors, easing market access even for foreign/US firms. But China denies rumors of US trade talks, says claims have ‘no factual basis’.

Senior aides across Trump admin holding high-level meetings over China curbs on rare earths critical to huge range of U.S. economic activity Deep concern about impact; no easy answers Companies relying on reserves that won’t last forever May help explain Trump’s blink, while Trump aims to fight China's control of minerals by investing in miners; Trump Eyes Sovereign Wealth Fund to Back U.S. Mining.

On April 24, 2025, China’s Foreign Ministry Spokesperson Guo said:

·       China and the US are not yet in official talks on tariffs

·       China will fight a tariff war if we must

·       Respect is a condition for any talks to happen

·       Tariff tsunami disrupts WTO rules, harms people of all countries

·       China will fight a tariff war if we must

·       China Commerce Ministry: Any content about China-US economic and trade negotiations is groundless and has no factual basis

·       If the US wants to resolve the issue, it should lift all unilateral tariff measures against China.

·       There haven't been trade negotiations between China and the US

·       China's Vice Premier He Lifeng: We are to enhance efforts on new foreign trade drivers

·       We must face up to the new situation of the recent US tariff increase on China

·       China's Foreign Minister Wang Yi in meeting with Swiss counterpart: China and Switzerland should jointly respond to anti-globalization challenges - Chinese Foreign Ministry

·       China's Foreign Minister, in meeting with Swiss counterpart: We welcome more Swiss firms to invest and do business in China - Chinese Foreign Ministry

·       China's state planner has trimmed the number of items on its negative list from 117 to 106

·       China's National Development and Reform Commission: New measures to boost market activity

·       China National Development and Reform Commission: New List Enhances Risk Prevention in Key Areas

·       China NDRC Adds New Businesses Including E-Cigarettes to Negative List

On early Thursday, April 24, 2025, Trump started his day, by posting his deluge of Truths:

·       Gas and grocery prices are WAY DOWN, just like I said they would be. Eggs are plentiful, and down 87%. NICE!

·       I am not happy with the Russian strikes on KYIV. Not necessary; and very bad timing. Vladimir, STOP! 5000 soldiers a week are dying. Let’s get the Peace Deal DONE!

·       Rupert Murdoch has told me for years that he is going to get rid of his FoxNews, Trump-Hating, Fake Pollster, but he has never done so. This “pollster” has gotten me, and MAGA, wrong for years. Also, while he’s at it, he should start making changes at the China Loving Wall Street Journal. It sucks!!!

·       Boeing should default on China for not taking the beautifully finished planes that China committed to purchase. This is just a small example of what China has done to the USA, for years… And, by the way, Fentanyl continues to pour into our Country from China, through Mexico and Canada, killing hundreds of thousands of our people, and it better stop, NOW!

On Thursday, April 24, 2025, Trump said in various White House pressers:

·       Ukraine and Russia both have to come to the table

·       I think we will get peace

·       Both sides want to make peace

·       I have my deadline on the Russia-Ukraine deal

·       After the deadline, we'll have a different attitude

·       NATO is not as powerful without the US

·       Nearly all nations have traded a surplus with the US

·       Norway has a trade surplus with the US

·       We will be talking about trade and other things with Norway. I think we'll come to a quick conclusion with Norway.

·       Trump on China trade talks: We had a meeting this morning

·       Trump on trade talk: It doesn't matter who 'they' is

·       We'll set prices for deals at some point

·       They either negotiate a deal or we set a deal that we think is fair,"

·       Many countries receiving US military support treat the US unfairly in trade; the US has been ripped off by both friends and foes for a long

·       The US met with China for trade discussions this morning

·       We may reveal details later, but I can tell you they had meetings this morning, and we've been meeting with China

·       Either countries negotiate a deal, or we set a deal or reciprocal tariffs

·       At some point, we'll set prices for deals

·       Trump reiterates criticism that the Fed is too late in cutting interest rates.

·       Nations got away with murder on trade

·       I was not happy with the Russia strike

·       Trump on additional Russia sanctions: Things will happen; I would prefer to answer the question about Russia sanctions in a week

·       We're putting a lot of pressure on Russia.

·       Trump, on Ukraine Giving Up Territory: Depends on what territory. I think will be very difficult to get Crimea back.

·       I don't think Russia is an obstacle to peace

·       Russia has offered to stop the war and not take all of Ukraine

·       Russia has made big concessions

·       Norway is going to help us end the war

·       We are getting very close to a deal on the war in Ukraine.

·       Trump on Proposed Norway Tariff Rate (15%): I think they could pay more; they have a lot of funds and are also debt-free

·       Trump refers to Norway's wealth fund when asked about tariffs

·       World Leaders want to meet on trade while in Rome

·       Trump denies China’s statement about no trade talks with the US, says they met ‘this morning’

·       I think we're doing well with Iran, we're having very serious meetings concerning Iran

·       There are only two options with Iran, one is not good

·       Good housing numbers despite higher interest rates—Fed should cut rates now

·       US Treasury Secretary Bessent: I had a good meeting with South Korea today. We may be moving faster than we thought, we could get to terms next week

·       US Treasury Secretary Bessent: South Korea brought their A-game

·       The US Treasury Secretary Scott Bessent: trade negotiations with South Korea may be progressing more rapidly than previously expected, adding that upcoming discussions would focus on technical terms to advance bilateral cooperation. South Korea first came and thus getting the deal first

Fed and also IMF waiting for Trump tariff clarity

On Thursday, Fed’s Hammack said:

·       Uncertainty is weighing on businesses and their planning

·       Firms are pausing investments amid uncertainty

·       We don't know yet what uncertainty and trade policy will do to the economy

·       I don't have a base case right now; I am looking at scenarios for the economy

·       The Fed needs to be patient; it's too soon to consider a move in May

·       I am seeing good things in the hard data, but softer data is an issue

·       The Fed will move quickly if it needs to

·       The US economy is very resilient

·       Fed could move in June if the data is clear about the economy's state

·       Lower stocks, bonds, and dollar trade should be monitored

·       It's possible that Trump's view on the Fed chair could affect the data

·       Unwise to be proactive amidst policy uncertainty

·       The market should determine the term premium level

·       High bar for the Fed to intervene in supporting markets

·       Now is not a good time to be pre-emptive with rate cuts

·       Uncertainty is a big issue in the economy, causing businesses to pause

·       Reiterates Now is a Good Time for Monetary Policy to Take Its Time

·       The Fed needs to be patient, it's too soon to consider a move in May

On Thursday, Fed’s Waller said:

·       Tariffs are part of most economic debates now

·       Firms are trying to see how to navigate tariffs

·       It wouldn't surprise me to see more layoffs and higher unemployment

·       Smaller tariffs will have a modest pass-through

·       We need better control of the budget deficit

·       There's no obvious reason why tariffs should be off the table as part of the fiscal debate

·       It is not likely that, by July, there will be clear tariff impacts yet

·       The easiest place to offset tariff costs is by cutting payroll

·       We could see prices going up as layoffs start to happen

·       The second half of the year will bring clarity on the tariff impact

·       It is less the level of unemployment, but the speed of change that’s the focus

·       It's possible that tariffs could push up the unemployment quickly

·       The struggle over the last 18 months has been uneven inflation progress

·       I still strongly believe tariffs will be a time price level effect

·       Demand slowdown from tariffs would offset some inflation impact

·       It's going to take courage to stare down tariff price increases and see them as transitory

·       I'm willing to look through tariff price rises

·       Rate cuts could come from rising unemployment

·       Data focus brings the risk of being late on policy action

·       The general tone is many companies are frozen by tariff uncertainty

On Tuesday, IMF's Managing Director Georgieva:

·       The world economy was stabilizing before the new trade shock, the global worry is more about uncertainty than tariffs

·       IMF cuts Asia's economic growth to around 3.9% in 2025 and 4% in 2026

·       Many Asian central banks have room to ease monetary policy to cushion economic blow from US tariffs

·       IMF For Asian policymakers, FX flexibility will be a key buffer against shocks, but FX intervention may come into play in case of heightening volatility

·       MF Asia and Pacific Director Srinivasan: Heightened uncertainty on tariffs feeding into market volatility, leading to tightening financial conditions, could be a big downside risk for Asia

Other News headlines related to Trump tariffs:

·       People inside the Trump White House are alerting Wall Street execs they are nearing an agreement in principle on trade with India, according to my sources who are senior Wall Street execs with ties to the White House. No details on timing, and recall that we have been here before with Japan only to have the goalposts changed and terms renegotiated. But if this holds, the India deal being envisioned will include agreed-upon goals and issues that have been addressed and resolved, as well as a deadline for the fully baked trade pact, my sources say. It could be used as a template for a deal with Japan, South Korea, and Australia, my sources add – Fox Reporter on X.

·       US: US Trade Representative met with Vietnamese counterpart yesterday

·       US Trade Representative Greer and Vietnam's counterpart agreed to work toward balanced trade.

·       Mexico's President Sheinbaum: Minister Amador's meeting with US Treasury Secretary Bessent was very good.

·       Trump admin told Japan it cannot give Japan special tariff treatment

·       The FT is reporting that Trump will exempt carmakers from some US tariffs

·       Japan to resist Trump's efforts to form a trade bloc against China

·       The US is considering exceptions for some Chinese auto parts

·       Trump said he is thinking of imposing 30% or higher tariffs on Canadian and Mexican car imports into the US in the future; he wants no car imports and all manufacturers should make cars in America

Conclusions: The US and China may soon cut retaliatory tariffs on each other to start Trade Deal 2.0

China believes in protocol-based diplomacy and trade talks. China will negotiate with the Trump admin in a mutually respectful environment; will never negotiate at gunpoint. Overall, the China trade deal would be a very complex process as Trump wants China to change, something which China will never accept and it may take another 2-3 years for US-China trade deal 2.0 like we have seen marathon meetings during Trump’s 1st term. In the meantime, Trump may keep a 10% basic universal tariff on China along with a 20% Fentanyl tariff on most of the items except some goods, which Trump considers a ‘national security interest’.

Trump’s overall tone indicates back-channel negotiations between the two largest economies in the world, controlling almost 45% of global nominal GDP. The US and China may soon officially reach out to each other to resolve this trade issue. Trump may soon announce a 90-day pause for Chinese tariffs also, keeping only the 20% Fentanyl tariffs for the time being, which may be reduced to universal basic levels of 10% by the next few weeks after China takes some ‘bold steps’ in addressing the US concern of Fentanyl production & trafficking.

Trump and Xi both will move after satisfying their respective domestic political compulsion. Like Trump 1.0, Trump 2.0 now also wants to change China, but it’s not possible. After all, China is also the largest customer of the US after the EU. Thus Trump is blinking first and China is also signaling for negotiation rather than protracted meaningless trade retaliation. Trump will first cut tariffs on China and China will also follow suit within an hour as backdoor negotiations may be going on for a face-saving exit for Trump and Xi; both leaders may be suffering from ego problems. But Trump’s madness about tariffs and his uncertain policies may be boosting China’s global influences rather than America's. Trump’s policy may be causing the biggest geopolitical shift in favor of China.

China or any exporter does not force US exports of goods at gunpoint; it’s the US importers that place orders for various consumer and industrial merchandise goods, which the US does not produce now due to various issues including efficacy and price. The US itself created this cheaper outsourcing system for lower cost of living and price & employment stability back home. This is nothing but the globalization of supply chains. But nationalistic Trump does not believe in globalization; he now only believes in localization. But for that, Trump has to ensure the reindustrialization of the US economy by creating appropriate infra and logistic hubs like China, not by imposing bellicose tariffs, forcing some companies to build factories in the US rather than in other countries.

Bottom line:

The US and China are dependent on each other for decades and may remain the same

Market impact: Wall Street surged further as Trump signals back-channel trade talks with China

On Thursday, Wall Street Futures gained for the 3rd consecutive day on hopes of real progress in US-China trade talks coupled with Fed rate cuts in June’25. The S&P 500 rose 2.25%, the Nasdaq 100 jumped 3.0%, and the Dow added 500 points. Earlier Thursday's EU session, Wall Street Futures were undercut by China’s denial of any trade talks with the Trump admin.

On Thursday, Wall Street was boosted by China trade savvy techs, communication services, and consumer discretionary, industrials, materials, energy, healthcare, and also banks & financials, real estate, and utilities, while dragged by consumer staples. Dow Jones was boosted by Salesforce, Caterpillar, NVIDIA, Microsoft, Amazon and Boeing, while dragged by IBM, P&G, Coca-Cola, United Health and McDonald’s.

Weekly-Technical trading levels: DJ-30, NQ-100, and Gold

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 40700) now has to sustain over 40100 for a further rally towards 41300/42300-43300/44600, and even 45200 in the coming days; otherwise sustaining below 40000, DJ-30 may again fall to 39700/38600-38000/37700-37300/37000 in the coming days.

Similarly, NQ-100 Future (19000) has to sustain over 19300 for a further rally to 196000/20000-20900/21400 and even 22000-22400 in the coming days; otherwise, sustaining below 19250, NQ-100 may again fall to 18600/18000-17600/16400 and 16200-15800 in the coming days.

Also, technically Gold (CMP: 3240) has to sustain over 3265-3275 for a further rally to 3305/3335*-3355/3375*-3400/3425, and even 3450/3505*-3525/3555 in the coming days; otherwise sustaining below 3255-3245, Gold may again fall to 3180/3130-3065/2990 and 2960/2900*-2800/2750 in the coming days.