World

How Trump’s Trade Tone Shifted Markets: What Investors Need to Know

Asian stocks fell due to US-China trade tensions, but Trump’s tone eased fears. Earnings and Fed guidance awaited.

October 12, 2025, 11:41 PM

Bronze bull sculpture in front of the Shenzhen Stock Exchange building

A striking bronze bull sculpture stands in front of the modern, glass-clad Shenzhen Stock Exchange building, symbolizing financial strength and market activity. By MDL.

Executive Summary

U.S.-China trade tensions caused initial market jitters, but President Trump’s conciliatory tone over the weekend suggested a potential softening of stance.

Upcoming Q3 earnings reports from major U.S. banks and anticipated Federal Reserve rate cuts later this year are key economic focuses.

Asian stock markets experienced declines, gold hit a new record high reflecting global uncertainty, and oil prices recovered on trade dispute compromise hopes.

The Story So Far

The current market volatility is primarily driven by the ongoing U.S.-China trade dispute, characterized by initial tariff threats from President Trump followed by a more conciliatory tone, creating significant economic uncertainty. This situation is further influenced by widespread anticipation of potential Federal Reserve interest rate cuts, aimed at stimulating the economy, and the critical need for strong corporate earnings reports to justify current market valuations. Additionally, political uncertainties in regions like Europe and Japan contribute to the cautious investor sentiment.

Why This Matters

Despite initial turbulence caused by U.S.-China trade tensions, President Trump’s more conciliatory tone offers a potential pathway to de-escalation, which could stabilize global markets and influence commodity prices like oil. Concurrently, the imminent U.S. earnings season will be critical in justifying current market valuations, while the high probability of Federal Reserve rate cuts signals a proactive monetary policy aimed at stimulating the economy, potentially impacting borrowing costs and investment decisions worldwide, all against a backdrop of rising gold prices reflecting ongoing uncertainty.

Who Thinks What?

President Donald Trump initially threatened significant tariffs on Chinese goods but later adopted a more conciliatory tone, stating that “everything would be fine” and the U.S. did not want to “hurt” China, signaling a potential softening of stance.

Beijing defended its export restrictions on rare earth elements and equipment as a response to U.S. aggression but refrained from imposing new tariffs on American products.

Goldman Sachs chief economist Jan Hatzius suggested that a likely resolution to the trade dispute would be an extension of the current tariff pause beyond November 10, accompanied by limited concessions from both sides.

Asian stock markets experienced a turbulent start to the week, with futures indicating losses in Japan and declines across other regional indices, following heightened tensions in the U.S.-China trade dispute. Despite initial market jitters, Wall Street futures showed signs of recovery, and U.S. President Donald Trump adopted a more conciliatory tone regarding trade relations over the weekend. The market’s reaction also reflected ongoing political uncertainties in Japan and Europe, alongside anticipation for upcoming earnings reports and Federal Reserve guidance.

Trade Tensions and Market Response

The U.S.-China trade war escalated with fresh rhetoric, initially spooking markets already grappling with high valuations. President Trump, who had previously threatened 100% tariffs on Chinese goods from November 1, later posted that “everything would be fine” and the U.S. did not want to “hurt” China, signaling a potential softening of stance.

Beijing, for its part, defended its export restrictions on rare earth elements and equipment as a response to U.S. aggression but refrained from imposing new tariffs on American products. Goldman Sachs chief economist Jan Hatzius suggested that a likely resolution would be an extension of the current tariff pause beyond November 10, accompanied by limited concessions from both sides.

Global Economic Outlook and Central Bank Actions

The week is set to feature key economic events, including the start of earnings season for major U.S. banks such as JPMorgan, Goldman Sachs, Wells Fargo, and Citigroup. S&P 500 companies are projected to show an 8.8% increase in third-quarter earnings year-over-year, according to LSEG IBES, with strong results needed to justify current market valuations.

In monetary policy, futures markets are pricing in a high probability of a quarter-point rate cut from the Federal Reserve later this month, with a similar likelihood for another cut in December. Fed Chair Jerome Powell is scheduled to speak on the economic outlook on Tuesday, providing potential guidance on the central bank’s future actions.

Regional Market Dynamics

Japanese markets were closed for a holiday, but Nikkei futures indicated a significant dive from Friday’s cash close, despite a slight rebound in early trading. Elsewhere in Asia, South Korea’s KOSPI index slid 2.1%, and Australia’s S&P/ASX 200 lost 0.5%, contributing to a 0.6% drop in MSCI’s broadest index of Asia-Pacific shares outside Japan.

European markets also faced political headwinds, as the French presidency announced a new cabinet lineup for Prime Minister Sebastien Lecornu, who faces challenges in steering a budget through a divided parliament. EUROSTOXX 50 futures edged up 0.2%, while DAX futures firmed 0.4%.

Commodities and Currencies

Currency markets saw some stabilization following Friday’s flight to safe havens. The dollar gained 0.5% against the yen but remained steady against the euro and Swiss franc. The dollar index held firm after a dip on Friday.

Gold continued its upward trend, reaching a new record of $4,059 an ounce, reflecting its role as a hedge against global fiscal and political uncertainty. Oil prices also recovered ground, with Brent crude rising 1.0% to $63.36 a barrel and U.S. crude increasing 1.0% to $59.45 per barrel, driven by hopes for a compromise in the U.S.-China trade dispute.