Xi and Trump Hold Call as Beijing Flags Cooperation, Reiterates Taiwan Position
Chinese state media said President Xi Jinping spoke by phone with U.S. President Donald Trump, a rare direct engagement that touched on Taiwan, Ukraine and expanding areas of cooperation. The conversation revives focus on U.S.–China policy direction, tariff risks and the potential impact on inflation, yields and risk appetite heading into year-end positioning.
Beijing readout points to cooperation, reiterates Taiwan stance – According to China’s official media, Xi and Trump discussed broadening the list of bilateral cooperation areas and “opening new space” for engagement. – The readout said Xi clarified Beijing’s position on Taiwan, calling the island’s “return” an important element of the post–World War II international order, and urged efforts to “jointly safeguard the victorious outcome of World War II.” – The leaders also discussed the Ukraine crisis, with Beijing urging all parties to narrow differences.
Tariffs return to the foreground Trump, in a post on Truth Social, argued that tariff receipts could accelerate as prior inventory “stock-ups” are worked down, asserting payments could become “record setting.” The remarks revive debate over tariff pass-through dynamics: – If foreign exporters discount to absorb duties, U.S. consumer-price effects may be contained while foreign margins compress. – If U.S. importers absorb costs, corporate margins in import-heavy sectors tighten. – If costs are passed to consumers, inflation pressures could re-emerge—even if one-off—complicating disinflation and potentially lifting the term premium in U.S. rates.
Market implications: FX, rates and sector sensitivities – FX: Traders will gauge USD/CNH and broader Asia FX for any policy signal or tone shift. A firmer tariff trajectory typically supports the dollar versus trade-sensitive currencies and weighs on the offshore yuan. – Rates: A renewed tariff narrative could nudge breakevens higher and keep the back end of the Treasury curve sticky if inflation risk premia rebuild, even as growth data cools. – Equities: Semiconductors, hardware and capital goods with China exposure, along with retailers reliant on imported goods, are most sensitive to tariff repricing. Conversely, reshoring beneficiaries and select industrials could see relative support. – Commodities and freight: Any hint of de-escalation could underpin industrial metals on improved global demand sentiment, while escalation risks can pressure supply-chain equities and raise logistics costs.
Policy watch: What comes next – Markets will look for a U.S. readout to compare against Beijing’s characterizations, alongside any Commerce or USTR headlines that clarify tariff scope, timing and exemptions. – Upcoming economic prints—including U.S. inflation gauges and China PMIs—will intersect with geopolitics to steer near-term FX volatility and yield dynamics. – Positioning into year-end is hypersensitive to headline risk; liquidity pockets could amplify moves on any concrete policy signals.
Market Highlights – Chinese state media says Xi and Trump held a phone call covering Taiwan, Ukraine and cooperation. – Beijing reiterated its position on Taiwan within the post-war order framework. – Trump said tariff revenues could surge as prior inventory buffers fade. – Tariff pass-through scenarios present divergent paths for inflation and corporate margins. – FX traders will monitor USD/CNH and Asia FX; rates desks eye breakevens and term premium. – Equity sensitivity highest in semis, hardware, import-reliant retail; reshoring themes in focus.
What to watch next – Any official White House readout and subsequent USTR or Commerce Department guidance on tariffs. – Signals from China’s Ministry of Commerce or PBOC that could inform yuan management and liquidity flows. – The next run of U.S. inflation data and China PMIs for confirmation of demand and price trends. – Corporate guidance from multinationals on pricing, inventories and supply-chain flexibility.
Questions and answers Q: Has Washington confirmed the call? A: As of the Chinese state media report, the U.S. readout was not immediately available. Markets are awaiting a parallel statement to reconcile details and tone.
Q: What did Beijing emphasize on Taiwan? A: China reiterated that Taiwan’s “return” is part of the post–World War II order, restating its long-held position while calling for progress in bilateral ties.
Q: How could tariffs affect inflation and rates? A: If duties are passed through to consumers, inflation could blip higher, supporting breakevens and potentially keeping long-end yields elevated. If exporters or importers absorb costs, the impact shifts toward margins instead of CPI.
Q: Which assets are most exposed to policy shifts? A: USD/CNH, Asia FX, U.S. breakevens, and equities in semiconductors, hardware and import-heavy retail are most sensitive. Industrial metals and logistics can also react to any escalation or de-escalation signals.
This article was produced by the BPayNews markets desk.
