Economy

Asian Markets Plunge: Will Trump and Xi’s Meeting Calm Trade War Fears?

Asian stocks tumbled on trade war fears. US and China exchanged port fees and sanctions despite summit talks.

October 14, 2025, 10:22 AM

Businessman in a dark suit checks his smartphone while standing in front of a large digital screen displaying global stock market indices.

This photo captures a businessman intently checking his mobile device against a backdrop of a large digital stock board displaying various international indices and market data. By Keisuke_N / Shutterstock.com.

Executive Summary

Asian stock markets experienced a significant downturn due to increasing skepticism over a U.S.-China tariff agreement, despite President Trump’s scheduled meeting with Chinese leader Xi Jinping.

Trade tensions escalated as both the U.S. and China implemented new port fees and Beijing announced sanctions against five U.S.-linked subsidiaries of Hanwha Ocean.

U.S. Treasury Secretary Scott Bessent accused Beijing of attempting to damage the global economy, while China stated the U.S. cannot pursue negotiations while issuing threats, underscoring deep divisions.

The Story So Far

The significant downturn in Asian stock markets is primarily driven by persistent skepticism surrounding a potential tariff agreement between the United States and China. This uncertainty stems from an ongoing trade dispute marked by escalating measures, including new port fees imposed by both nations and recent Chinese sanctions against U.S.-linked firms, even as President Donald Trump is still scheduled to meet Chinese leader Xi Jinping later this month. Both Washington and Beijing are perceived to be engaged in diplomatic posturing and negotiation tactics ahead of their summit, contributing to market anxiety.

Why This Matters

The escalating U.S.-China trade dispute, characterized by significant downturns in Asian stock markets and new retaliatory measures such as port fees and sanctions, signals a deepening conflict that could increase costs for global supply chains and heighten economic uncertainty, potentially influencing central bank decisions like Federal Reserve rate cuts despite President Trump’s planned meeting with Chinese leader Xi Jinping.

Who Thinks What?

Asian stock markets and some analysts expressed significant skepticism over the prospect of a tariff agreement, leading to a market downturn, with some viewing current actions as “escalate to de-escalate” posturing. However, other analysts believe President Trump’s tariff threats are negotiation tactics rather than a definitive policy shift and suggest China may possess unique bargaining power.

U.S. Treasury Secretary Scott Bessent confirmed that President Donald Trump is still scheduled to meet Chinese leader Xi Jinping, but also accused Beijing of attempting to damage the global economy, while the U.S. implemented new port fees.

China’s commerce ministry asserted that the United States cannot pursue negotiations while simultaneously issuing threats, with Beijing responding by implementing new port fees and announcing sanctions against U.S.-linked subsidiaries.

Asian stock markets experienced a significant downturn on Tuesday, fueled by increasing skepticism over the prospect of a tariff agreement between the United States and China. This market anxiety emerged despite U.S. Treasury Secretary Scott Bessent’s confirmation that President Donald Trump is still scheduled to meet Chinese leader Xi Jinping later this month, as both nations implemented new port fees and Beijing announced sanctions.

Market Reaction Amid Trade Doubts

MSCI’s broadest index of Asia-Pacific shares, excluding Japan, reversed earlier gains to fall 1.2 percent, with S&P 500 futures also declining. Japan’s Nikkei stock index dropped as much as 3 percent, while Hong Kong’s Hang Seng Index fell 2 percent, and mainland China’s CSI 300 gauge slipped 1.3 percent.

Marc Velan, head of investments at Lucerne Asset Management in Singapore, characterized the current dynamic as “escalate to de-escalate,” suggesting both Washington and Beijing are posturing ahead of their November summit. He added that neither country can afford a prolonged trade war, particularly with U.S. mid-term elections approaching.

Diplomatic Engagements and Accusations

Treasury Secretary Bessent stated that President Trump remains on track to meet Chinese leader Xi Jinping in South Korea in late October. However, Bessent also accused Beijing in an interview with the Financial Times of attempting to damage the global economy, adding to the prevailing tensions.

In response, a spokesperson for China’s commerce ministry asserted on Tuesday that the United States cannot pursue negotiations while simultaneously issuing threats. This statement underscored the deep divisions and mistrust that continue to complicate trade discussions.

Escalating Measures and Sanctions

Further escalating the trade dispute, both the U.S. and China began imposing new port fees on ocean shipping firms today. These fees affect the transportation of a wide array of goods, from consumer products to crude oil, adding new costs to global supply chains.

Additionally, Beijing announced sanctions on Tuesday against five U.S.-linked subsidiaries of the South Korean shipbuilder Hanwha Ocean. This move signals China’s readiness to retaliate against perceived U.S. pressures, broadening the scope of the trade conflict.

Analyst Perspectives and Economic Outlook

Wall Street’s main indexes had seen a rebound on Monday, with chipmakers leading gains, after President Trump adopted a more conciliatory tone on trade. This followed a previous announcement by Trump of 100 percent tariffs on China, which had triggered market panic.

Analysts at Citi indicated they do not anticipate a significant escalation of trade tensions between Beijing and Washington. They suggested that China may possess unique bargaining power, potentially requiring the U.S. to adopt a more flexible negotiation stance.

Danske Bank analysts echoed this sentiment, viewing Trump’s latest tariff threats primarily as a negotiation tactic rather than a definitive policy shift. They noted that any further escalation in the trade war would likely increase the probability of the Federal Reserve implementing planned rate cuts sooner.

Meanwhile, traders are anticipating a near-certain 25-basis-point interest rate cut by the Federal Reserve at its October 29 meeting. According to CME Group’s FedWatch tool, pricing of Fed funds futures implied a 96.7 percent probability of such a cut.

Sector-Specific Dynamics

Asian chipmakers experienced sharp volatility throughout the day. TSMC managed to maintain some gains after OpenAI announced a partnership with Broadcom to develop its first in-house artificial intelligence processors. South Korea’s Kospi index, despite an early rally driven by Samsung Electronics’ better-than-expected third-quarter profit projection, ultimately erased gains due to the broader market selloff.

Looking Ahead

The fluctuating market sentiment underscores the deep uncertainty surrounding the U.S.-China trade relationship. As the planned meeting between President Trump and Chinese leader Xi Jinping approaches, global markets remain on edge, keenly observing whether diplomatic efforts can overcome the escalating trade measures and accusations.