China denies trade negotiations as global markets react to tariff turmoil

Despite recent U.S. overtures, China has firmly denied the existence of any trade negotiations and demanded the full removal of tariffs, sending ripples across global markets. As President Trump hints at easing his aggressive tariff stance, scepticism from Beijing and diverging international responses are injecting volatility into financial markets, challenging investor sentiment, and reshaping the policy outlook from central banks and global trade partners alike.

China pushes ack: no talks, no concessions

China’s Ministry of Commerce delivered a sharp rebuttal to recent suggestions from the U.S. administration that trade talks were underway. A spokesperson dismissed reports of progress as “groundless,” stating that no negotiations will occur unless the U.S. revokes all unilateral tariffs and shows “sincerity” in its approach. Beijing reiterated its demand for respect, consistent U.S. policy, and a designated point of contact before considering any formal dialogue.

The Chinese leadership has so far resisted President Trump’s attempts to initiate direct talks, insisting that Washington must first address concerns over sanctions, Taiwan, and strategic respect. With tariffs still levied at 145% on most Chinese goods, Beijing views recent U.S. messaging as superficial and politically driven, not grounded in serious economic cooperation.

Market reactions: Equities stagnate, safe havens rise

Global markets reflected the rising uncertainty. U.S. stock futures stalled after a two-day rally, and European indices pared losses but struggled to sustain gains. Haven assets such as gold, the Japanese yen, and the Swiss franc saw renewed demand. Treasuries advanced, while the Bloomberg Dollar Spot Index slipped 0.3%, highlighting fading confidence in U.S. policy stability.

S&P 500 futures remained flat, Nasdaq 100 futures were steady, and Dow Jones futures edged lower. Spot gold climbed 1.3% to $3,330/oz, signaling investor anxiety. Meanwhile, IBM shares dropped 8% in premarket trading after a disappointing earnings report, further weighing on sentiment.

Europe’s monetary response: ECB signals flexibility amid trade pressures

In response to tightened financial conditions and mounting global risks, ECB Governing Council member Olli Rehn emphasized the need for agility in monetary policy. He signaled that larger-than-usual interest rate cuts should not be ruled out, particularly if inflation projections dip below the 2% target.

Following seven consecutive rate reductions, the deposit rate now stands at 2.25%. Markets are pricing in two additional cuts by year-end, and a potential third. The ECB is expected to reevaluate its stance in June with fresh economic forecasts in hand. Rehn underlined that pervasive geopolitical tension—especially from U.S. trade conflicts—is already materializing in Europe’s growth risks.

Japan’s calculated neutrality: Avoiding the anti-China bloc

Japan, while negotiating to secure permanent relief from U.S. tariffs, is resisting pressure to align against China. Tokyo, heavily reliant on trade with Beijing, is working to finalize a bilateral agreement with the U.S. before a 90-day reprieve on tariffs expires—but without committing to any broader bloc strategy.

Officials reiterated that Japan won’t support any deal that undermines its ties with China. The Japanese government is simultaneously trying to restore seafood and beef exports to China and facilitate industrial cooperation, including Toyota’s $2 billion factory plan in Shanghai. The balancing act reflects Japan’s economic dependence on both the U.S. and China, and the political tightrope it must walk amid escalating tensions.

Economic policy outlook in China: Cautious on stimulus

While pressure mounts, Beijing is not yet ready to unleash large-scale stimulus. First-quarter growth exceeded expectations at 5.4%, giving policymakers room to assess the situation. However, the Politburo’s upcoming meeting may offer signals on targeted support measures if tariff impacts intensify.

Central bank governor Pan Gongsheng warned that prolonged trade friction risks damaging global economic trust. At the G20 meeting in Washington, he called for coordinated efforts to prevent the world economy from entering a “high-friction, low-trust” regime.

Navigating an era of strategic disarray

The trade narrative between the world’s two largest economies remains anything but clear. With China rejecting diplomatic overtures and the U.S. struggling to build a cohesive global strategy, the international community finds itself navigating a fractured landscape. Market participants face headline-driven volatility, central banks lean toward policy flexibility, and strategic alliances are being reevaluated. As geopolitical uncertainty becomes the new norm, agility in positioning and clarity in risk management will be paramount.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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