Markets Rebound as Trump Softens Tariff Rhetoric Toward China

​A Softer Tone Sparks Relief
After a bruising week of tariff threats and investor panic, President Donald Trump struck a more measured tone on trade — and Wall Street exhaled. Futures for the Dow Jones, S&P 500, and Nasdaq all edged higher Monday morning after Trump hinted he might reconsider his 100% tariffs on Chinese imports.

Investors seized on the slightest sign of diplomacy. “We’re talking to China. I think we’ll work something out,” Trump said Sunday, signaling that the economic standoff might not escalate as sharply as feared.

China’s Exports Hold Up Despite Pressure
Fresh trade data out of Beijing added to the sense of calm. China’s exports rose 8.3% year-over-year in September, far surpassing expectations and marking the fastest pace since March. The numbers highlight how Chinese manufacturers have successfully diversified away from the U.S., cushioning the blow from Trump’s earlier 35% tariff hike.

Exports to the U.S. have slumped 27%, but shipments to Europe, Southeast Asia, and Africa have surged — a sign that Beijing is finding new customers for its goods. “China has proven more resilient than many expected,” said one economist. “But another round of tariffs would hit smaller exporters and jobs hard.”

Rare Earths Add a Twist
The latest flashpoint came after Beijing imposed export controls on rare earth minerals, essential materials for tech, EVs, and defense products. The U.S. called the move an act of “economic coercion,” while China argued it was a “lawful step to safeguard national interests.”

Trump’s earlier response — threatening to triple tariffs — sent global markets tumbling late last week. His weekend pivot, however, suggested a potential off-ramp. Analysts now expect both sides to seek de-escalation ahead of the APEC Summit in South Korea later this month, where a meeting between Trump and President Xi Jinping remains possible.

Pressure at Home and Abroad
Behind the scenes, Chinese exporters describe fierce competition to replace lost U.S. orders. Many call it a “mad rat race” — undercutting prices, cutting staff, and slashing wages just to hold market share. Meanwhile, weaker consumer demand at home is pushing factory owners to chase every foreign buyer they can find.

That has Beijing walking a tightrope: pushing exports to keep factories running while trying to boost household consumption to sustain growth. China’s GDP remains on track to expand about 5% this year, but economists warn that persistent deflation and soft domestic spending could weigh on 2026.

Investors Watch the Clock
For now, markets appear willing to believe Trump’s softer tone. Futures suggest a modest rebound for U.S. equities, while Asian markets — rattled last week — steadied overnight. But the calm may not last long.

As ING economist Lynn Song put it, “Neither side wants a trade war, but miscalculations can happen quickly.”

​In other words: the truce may hold — until the next tweet.