US and China announced an “early consensus” and a “very substantial framework” for a trade agreement
The prospect of a definitive de-escalation in the US-China trade war sent a powerful wave of optimism across global financial markets on October 27, 2025.
Following intense weekend negotiations in Kuala Lumpur, Malaysia, officials from the world’s two largest economies announced an “early consensus” and a “very substantial framework” for a trade agreement, paving the way for a high-stakes signing meeting between US President Donald Trump and Chinese President Xi Jinping later this week.
This news, which effectively takes the threat of crippling new tariffs “off the table,” was greeted with a massive rally in equities, while traditional safe-haven assets saw their appeal diminish.
Market Relief and Record Highs
The market’s reaction was immediate and decisive. Investors, long rattled by the recurring cycles of trade tensions, celebrated the perceived end to months of uncertainty.
* Asian Markets Surge: Stock markets across Asia led the gains. Japan’s Nikkei 225 index surged over 2% to cross the 50,000 level for the first time, continuing its record run. Hong Kong’s Hang Seng Index climbed 1%, and the Shanghai Composite Index advanced nearly 1%.
* US Stocks Hit All-Time Highs: Futures for the S&P 500 and Nasdaq jumped, with the S&P 500 hitting an all-time high as Wall Street reacted to the news.
* Risk-On Sentiment: The move towards riskier assets caused a dip in safe-havens. Gold prices saw a fall, while the US Dollar index declined, and copper futures—a barometer of global demand—rose significantly on trade optimism.
The market sentiment was best encapsulated by one analyst who noted that the confirmation that the imminent 100% tariff threat is “off the table” was the single most important element driving the current rally.
Key Consensus Points Emerge
The preliminary agreement was hammered out by US Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng and their respective delegations on the sidelines of the ASEAN Summit.
While details still need to be finalised and approved domestically before the leaders’ meeting in Gyeongju, South Korea, the framework addresses several critical, contentious issues:
• New Tariff Threat Averted: The framework successfully prevents the US from implementing a threatened new round of 100% tariffs on Chinese goods, which had been poised to take effect in November.
• Rare Earth Controls Postponed: China has agreed to a deferral of its threatened export controls on rare earth minerals. These minerals are vital components for high-tech industries worldwide, and the Chinese restriction had caused severe supply chain concerns.
• Agricultural Purchases: The deal is expected to include a commitment from Beijing to make “substantial” purchases of American soybeans and other agricultural products, a key demand for the Trump administration.
• Fentanyl Cooperation: Both sides reached a consensus on arrangements to address the flow of fentanyl precursor chemicals into the US, potentially leading to a reduction in the 20% US tariff currently tied to the crisis.
High-Stakes Meeting Awaits
The preliminary consensus now sets the stage for the highly anticipated meeting between President Trump and President Xi Jinping, expected to take place on Thursday in South Korea on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit.
US officials, including Secretary Bessent, expressed confidence that the leaders would be able to finalise and sign a comprehensive deal.
However, some analysts caution that while the immediate crisis has been averted, the deal may not fully resolve deeper, more complicated issues such as national security concerns, forced technology transfers, and industrial subsidies.
Nevertheless, for now, the markets are squarely focused on the good news, with the tentative agreement viewed as a major, positive step toward restoring stability to the global trade environment.
