Asia Stocks Edge Higher as Investors Balance China-US Tensions and Rate Cut Hopes

16/10/2025

Asia Stocks Edge Higher as US-China Tensions Simmer and Rate Cut Hopes Rise

Hong Kong — Asian markets moved slightly higher on Thursday as investors tried to make sense of the latest twists in the China–US trade tensions and growing hopes that the Federal Reserve will keep cutting interest rates this year.

The week’s trading has been choppy ever since US President Donald Trump reignited the tariff fight with China last Friday. He threatened to slap 100% tariffs on Chinese goods in response to Beijing’s new rare-earth export controls.

Although Trump later softened his tone, the damage was done. Both sides have since traded warnings and small retaliatory steps, raising fears that the fragile trade truce that’s been in place for months could fall apart.

When asked by reporters if the two nations were in a trade war, Trump replied bluntly:

“Well, you’re in one now.”

He added, “We have a 100% tariff. If we didn’t have tariffs, we’d be exposed as being a nothing.”

Mixed Signals from Washington

At the same time, Treasury Secretary Scott Bessent tried to calm markets by suggesting a longer pause in tariffs while both sides negotiate over the rare-earth dispute.

Since May, the US and China have been extending their tariff suspensions every three months as they work toward a more permanent deal. Bessent said the pause might be extended again before Trump and Chinese President Xi Jinping meet at the upcoming Asia-Pacific Economic Cooperation (APEC) summit in South Korea.

“Together, they’re running the classic good cop, bad cop routine,” said Stephen Innes from SPI Asset Management. “Trump’s tough talk adds anxiety, while Bessent’s calm comments offer relief — and markets are hooked on that mix.”

Markets React

After a mostly positive day on Wall Street, Asian markets followed suit for the second day in a row.

Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Wellington, Taipei, and Manila all traded higher, helped by growing expectations of more Fed rate cuts.

The Fed’s Beige Book, which tracks US economic conditions, pointed to a softer job market, echoing other weak data seen in recent weeks. That’s boosted hopes that the central bank will continue easing policy — something Trump has been pushing for.

Fed Chair Jerome Powell added that “downside risks to employment appear to have risen,” reinforcing those expectations.

Still, not everyone’s convinced. Economists at Bank of America warned that big risks remain, including uncertainty over tariffs, weak job growth, and unpredictable policy decisions from Washington.

Gold and Currencies Move

With investors looking for safety, gold hit another daily record, climbing to $4,234.70 an ounce.

Meanwhile, India’s rupee bounced strongly after its best rally since June, thanks to central bank intervention, a weaker dollar, and lower oil prices.

“The rupee’s strong rebound was mainly driven by central bank action, a softer dollar, and renewed foreign inflows,” said Dilip Parmar from HDFC Securities.