U.S. - China Trade Framework Signals Risk On Surge

On October 27, 2025, markets rallied sharply on signs that Donald Trump and Xi Jinping may soon formalize a trade deal after senior officials from the U.S. and China reportedly settled a “very substantial framework” ahead of a summit.

What happened

Negotiators in Malaysia indicated progress on key issues including rare earth export controls, tariff relief and agricultural commitments. The talk of a leadership meeting later this week triggered equity, commodity and currency moves worldwide. U.S. stock futures climbed (~0.7%), while risk assets such as crypto rebounded.

Why it matters

• Global trade tension has been one of the major drags on investor sentiment throughout 2025 a credible roadmap to easing those tensions reduces a major overhang.

• For sectors like semiconductors, rare earths, shipping and industrials, the implications are meaningful: less trade friction means higher demand potential and fewer supply chain disruptions.

• The deal also interacts with monetary policy. Softer trade risk + expectation of rate cuts = better backdrop for equities, commodities and risk assets broadly.

Market reactions & implications

• Equities: Asian and U.S. stock markets rallied, led by Japan (the Nikkei 225 surpassed 50,000 for the first time).

• Commodities: Oil prices rose on improved demand outlooks (see commodity article below).

• Currencies & FX: The U.S. Dollar weakened slightly as risk-on flows picked up; safe-haven assets lagged.

• Be cautious: While the framework is positive, execution matters. Delays, incomplete commitments or new geopolitical shocks (e.g., tech export controls) could reverse sentiment quickly.

What to watch

• Official statements from Trump & Xi during the summit.

• Any timelines or deliverables attached to the trade deal (tariff rollback, export control changes).

• Central bank commentary, a major deal could tilt expectations toward earlier rate cuts.

• Corporate guidance from globally exposed supply chain firms (autos, semis, shipping).

The trade framework is a meaningful shift in global risk perception. If confirmed and executed, it could mark a cyclical tailwind for growth assets but investors should monitor delivery, not just rhetoric.