China Confirms U.S. Trade Talks Amid Rising Tariffs

China–U.S. Trade War

Economic

Summary:

U.S.-China trade talks announced, impacting global crypto markets. High volatility expected in crypto. Tariff removal remains a key negotiation issue.

Key Points:

● U.S.-China trade talks announced, impacting global crypto markets.

● High volatility expected in crypto.

● Tariff removal remains a key negotiation issue.

China Confirms U.S. Trade Talks amid Rising Tariffs

China has confirmed its intentions to initiate trade negotiations with the United States. This decision involves high-level figures, including U.S. Treasury Secretary Scott Bessent and Chinese Vice President Han Zheng, with talks scheduled to occur in Switzerland.

The talks hold significance due to their potential to stabilize markets and reduce tariffs. Immediate reactions include heightened speculative activity in cryptocurrencies, often a barometer for macroeconomic uncertainty.

Both nations prepare for impactful discussions led by key officials. Scott Bessent emphasizes economic security, while the Chinese Ministry of Commerce demands the U.S. end its unilateral tariff practices.

Cryptocurrencies like BTC and ETH may experience volatility. Market observers note historical fluctuations following similar talks, often leading to increased trading volume and price shifts in these assets.

Financial implications are vast. Economic cooperation between two of the world's largest economies could stabilize fast-moving assets like stablecoins. Confirmed negotiation settings are expected to shape cryptocurrency strategies.

On-chain metrics suggest potential waves of trading activity. Historically, such negotiations lead to rapid market response, particularly in assets tied to U.S.-China trade relations.

Anticipated trade talks may recalibrate economic policies, potentially reshaping financial landscapes. Historical patterns have shown crypto assets react strongly to geopolitical movements, emphasizing the broader implications of these talks.

Economic security is national security, and President Donald J. Trump is leading the way both at home and abroad for a stronger, more prosperous America. I look forward to productive talks as we work towards rebalancing the international economic system towards better serving the interests of the United States. — Scott Bessent, U.S. Treasury Secretary, United States, France24.

Source: CryptoSlate

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Economic

Forex

Hong Kong Steps In to Defend Currency Peg as Capital Inflows Intensify

In response to surging demand for the Hong Kong dollar (HKD) and a sharp appreciation to the strong end of its exchange band (7.75 HKD/USD), the Hong Kong Monetary Authority (HKMA) intervened again on May 6, injecting HK$60.543 billion during the New York session and HK$12.788 billion during the Hong Kong session. This marks the fourth such intervention in recent days, with total liquidity injections climbing to over HK$129 billion.

These actions are part of Hong Kong’s commitment to maintain its linked exchange rate system — a fixed peg in place since 1983. Under this system, the HKMA buys or sells U.S. dollars to keep the HKD within a band of 7.75–7.85 per USD. The latest moves have brought the aggregate balance of the banking system up to a projected HK$174.1 billion by May 8, reinforcing interbank liquidity.

Drivers Behind the Surge in HKD Demand

According to HKMA Chief Executive Eddie Yue, the capital inflow stems from a combination of rising foreign investment via the Hong Kong Stock Connect program and a broader shift in investor positioning. The weakening of the U.S. dollar and unwinding of short positions in Asian currencies — triggered partly by U.S. tariff retaliation measures announced in early April — have led to increased demand for HKD as a regional safe haven.

In addition, anticipation of new major stock listings in Hong Kong is prompting investors to pre-purchase HKD in preparation. This demand has not only strengthened the local currency but also pushed interbank HKD interest rates downward.

Currency Stability and Global Reserve Shifts

Despite the recent strength of the HKD, Yue cautioned about possible interest rate arbitrage if local rates fall below those in the U.S., potentially incentivizing investors to sell HKD in favor of USD. However, he emphasized that in the current volatile environment, such trades remain limited in scale.

Globally, investors and central banks are gradually diversifying away from U.S. dollar assets, although this remains a slow-moving trend. HKMA data shows that USD-denominated assets now make up 79% of Hong Kong’s Exchange Fund, down from over 90% in previous years. Still, Yue acknowledged that U.S. Treasuries remain the most liquid global reserve assets, and the USD will likely continue playing a dominant role in official reserves for the foreseeable future.

Source: The Business Times

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China–U.S. Trade War

Economic

U.S.–China to Resume Trade Talks, But Markets Remain Skeptical About a Quick Breakthrough

Markets welcomed news of a planned meeting between U.S. Treasury Secretary Scott Bessent and top Chinese trade officials this weekend in Geneva, but the response was restrained. The long-anticipated dialogue marks a tentative step towards de-escalation in a growing tariff war, yet both Washington and Beijing remain wary.

Bessent described the meeting as preliminary, intended to “work out what to talk about,” rather than produce immediate results. China, meanwhile, issued a cryptic yet pointed statement citing a proverb: “Listen to what is said, and watch what is done,” warning against any deceptive U.S. maneuvers under the guise of diplomacy.

Muted Optimism in Global Markets

U.S. futures held modest gains in Asian trading hours, while Hong Kong stocks jumped, supported not just by trade talk optimism but also by fresh signals of potential policy support from Beijing. The People's Bank of China hinted at interest rate cuts and widened access for insurers to invest in the stock market. While these measures cheered some investors, the response was modest as the more decisive move — aggressive fiscal stimulus — remains elusive.

In currency markets, Asian currencies — which had recently gained ground against the dollar — softened again, with the Indian rupee slipping further amid escalating tensions between India and Pakistan, marking their worst flare-up in over 20 years.

Investor Focus Shifts to Fed and Global Risk Trends

As the world watches the Geneva meeting, investor attention is also turning to the upcoming U.S. Federal Reserve policy update. No immediate rate change is expected, but markets will be parsing every word for signs of the Fed’s sensitivity to persistent inflation and resilient labor market data.

Recent employment figures showed a surprisingly strong U.S. jobs market, prompting traders to scale back expectations for interest rate cuts in the near future. This backdrop complicates both monetary and geopolitical decision-making, leaving financial markets in a state of uncertainty.

Broader Geopolitical and Earnings Watch

Beyond trade and central banks, European markets await earnings from major healthcare players like Fresenius and Novo Nordisk. While macroeconomic data releases today are secondary in importance, geopolitical developments — including the India-Pakistan conflict and broader global tariff rhetoric — continue to drive the narrative.

Though the U.S.–China meeting is a step forward, the path to a trade deal remains steep and strewn with mistrust. Until clearer commitments emerge — either through fiscal policy in China or tariff relief from Washington — markets are likely to stay cautious. For now, investors are pricing in risk, not resolution.

Source: Reuters

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FastBull Events

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Economic

A Dilemma of Timing: Inflation vs. Growth

The Federal Reserve finds itself at a pivotal juncture. Chair Jerome Powell, in recent remarks, admitted that the central bank faces “extremely difficult choices” as it tries to weigh early rate cuts to support slowing growth against the risk of reigniting inflation—particularly price pressures stoked by President Trump’s sweeping import tariffs.

Current forecasts suggest the Fed will hold rates steady at the 4.25–4.50% range, but forward guidance is now the primary concern. Policymakers appear inclined to wait for “hard evidence” of labor market weakening or a broader economic downturn before moving to cut rates, a stance echoed by former Fed Vice Chair Richard Clarida. The caution stems from fears that premature action could trigger inflationary spirals if tariff-induced price increases prove persistent.

The Tariff Trap and Stagflation Fears

Trump’s reimposed tariffs—most notably the 145% duties on Chinese imports—are complicating the Fed’s calculus. Higher import prices could cause a temporary inflation spike, but supply chain disruptions may also choke investment and output, increasing the risk of stagflation—a toxic mix of stagnant growth and high prices.

Former Fed Governor Lael Brainard warned that the central bank must determine whether tariff-driven inflation is transitory. If not, interest rates may need to remain elevated longer than markets expect. At the same time, if layoffs increase or household spending contracts, the Fed could come under intense pressure to reverse course.

Christopher Waller, one of the few current Fed officials signaling readiness to support growth if needed, believes the inflation impact of tariffs may fade by year-end. But others remain cautious, citing past missteps like the Fed’s underestimation of inflation risks in 2021.

Supply Chains, Public Expectations, and Powell’s Predicament

Former Boston Fed President Eric Rosengren and others highlight a critical challenge: even if rates fall, broken supply chains won’t fix themselves. “Lower rates won’t unclog ports or restock inventory,” Rosengren said, suggesting that monetary tools may be ill-suited for the kind of disruptions tariffs are causing.

Moreover, if consumers and businesses begin anticipating persistent inflation, they may adjust behavior—raising prices, wages, or demanding more compensation. Once inflation expectations become “unanchored,” the cost of restoring stability rises significantly.

Beth Hammack, the new president of the Cleveland Fed, summarized the prevailing mood among newer members: “I’d rather be slow and right than fast and wrong.”

The Political Undercurrent: Trump Looms Over the Fed

Adding pressure is the increasingly confrontational political environment. Trump, who has frequently criticized Powell and the Fed, is reasserting his influence and reshaping economic policy. This raises the stakes for how the Fed communicates. A dovish tone may spark speculation of imminent cuts, while a hawkish stance could dampen demand and fuel wage-price spirals.

Former Dallas Fed President Robert Kaplan cautioned: “Even if I want to cut rates, I would sound tough to preserve inflation expectations.”

With conflicting signals from inflation, labor data, tariffs, and politics, the Fed now faces a scenario in which either premature or delayed action could have profound consequences.

The upcoming decision will be less about immediate rate adjustments and more about managing expectations in an increasingly unstable macro environment. The global economy is watching closely: one wrong step by the Fed could shake not just U.S. markets, but ripple through currencies, bonds, commodities, and investor sentiment worldwide.

Source: WSJ

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Political

Economic

A Candid Oval Office Exchange

During a high-profile bilateral meeting at the White House on May 6, Prime Minister Carney made it unequivocally clear to President Trump that Canada would never entertain the idea of becoming the 51st U.S. state. According to a post-meeting statement reported by NBC, Carney said, “I have always been careful to separate desire from reality. I made it very clear in the Oval Office, as I have on behalf of Canadians for some time: this will never happen. Canada is not for sale.”

This bold declaration came in response to a series of remarks by President Trump in recent weeks, in which he openly expressed his interest in absorbing Canada into the United States, often framing it as a legacy-defining ambition.

Trump’s Reaction: Defiant, Yet Cordial

Speaking to the press after the meeting, President Trump offered warm praise for Prime Minister Carney, describing their conversation as “wonderful” and expressing personal admiration: “I like him. He’s a good man. We get along really well. This relationship is going to be strong.”

Yet when pressed about Carney’s categorical rejection of any annexation possibility, Trump offered a pointed reply: “Never say never.”

This rhetorical jab echoed earlier statements by Trump, who, late last month, reiterated that his proposal was not a joke. He emphasized a desire to be remembered as a president who expanded U.S. territory — an ambition that has included not only Canada but also Greenland, which Trump previously mentioned as a strategic acquisition target.

Geopolitical Implications and Canadian Resolve

Trump’s remarks, though not accompanied by concrete policy proposals, have stirred unease in diplomatic circles and domestic politics in Canada. Prime Minister Carney’s forceful language appears aimed at quelling any public speculation and reaffirming Canada’s firm stance on sovereignty and national identity.

The episode underscores growing tension between the two long-time allies at a time when trade friction, immigration disputes, and differing foreign policy approaches have already strained relations. It also illustrates how Trump’s increasingly revisionist vision of American power is reshaping the tone of U.S. diplomacy — blending transactional rhetoric with expansionist nostalgia.

While Trump’s comments may be seen by some as political theater, Carney’s categorical refusal signals Ottawa’s unwillingness to play along. With domestic unity and geopolitical integrity at stake, Canada has drawn a clear line in the sand — and for now, Trump’s territorial ambitions remain a provocative, but ultimately symbolic, gesture.

Source: NBC

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China–U.S. Trade War

Economic

Monetary Easing as a Preemptive Buffer Against Tariff Shocks

On May 7, the People's Bank of China (PBOC) cut its benchmark 7-day reverse repo rate by 10 basis points, lowering it from 1.5% to 1.4%. Governor Pan Gongsheng indicated that this reduction would also influence the country's Loan Prime Rate (LPR), which serves as a key benchmark for corporate and household borrowing.

In a parallel measure, the central bank announced a 50 basis point cut to the reserve requirement ratio (RRR) for commercial banks. This move is expected to inject approximately 1 trillion yuan (around $138.6 billion USD) into the financial system, aiming to boost liquidity and counteract downward economic pressure.

The measures were announced at a press briefing attended by senior officials from the National Financial Regulatory Administration and the China Securities Regulatory Commission, signaling broad institutional alignment on monetary policy strategy.

Trade War Escalation Sparks Financial Policy Shift

The monetary stimulus came shortly after Beijing confirmed that Vice Premier He Lifeng will meet U.S. Treasury Secretary Scott Bessent in Switzerland later this week to resume long-stalled trade talks. The discussions are set to focus on tariffs and broader commercial relations, following the Trump administration’s latest move to raise tariffs on Chinese imports to 145%.

In response, Beijing imposed its own set of retaliatory tariffs at 125%, further straining trade flows between the world’s two largest economies and fueling market volatility.

These developments have raised the stakes for both sides, with financial markets looking to the Switzerland meeting as a potential breakthrough moment. Although the talks are not expected to yield an immediate trade deal, they represent the first official high-level engagement since the tariff escalation, offering a possible off-ramp from further confrontation.

Market Outlook and Economic Signaling

Analysts view China’s rate cuts and liquidity boost as both a signal of internal economic fragility and a strategic move to cushion potential shocks from prolonged trade tensions. With global demand weakening and China’s domestic consumption still underperforming, the policy mix indicates a shift toward proactive stabilization.

Moreover, these moves may be designed to reassure investors and encourage private sector lending at a time when sentiment has been weakened by stock market turbulence and ongoing uncertainty over regulatory direction.

China’s unexpected monetary easing underscores the urgency of its economic challenges and highlights the geopolitical weight of the upcoming trade talks in Switzerland. While immediate breakthroughs remain unlikely, the coordinated policy action suggests Beijing is preparing both economically and diplomatically for a prolonged period of negotiation—and confrontation—with Washington.