Why US China Talks, Trump’s Tariff Gambit, and Fed Patience Matter Now

US–China trade talks

In the world of global finance, words are not cheap — they move billions. And this weekend, investors were hanging onto every word from Washington and Beijing as US–China trade talks resumed behind closed doors.

While early feedback from both sides has been cautiously optimistic, markets remain nervously range-bound. Why? Because President Trump, in a Friday surprise, described 80% tariffs on Chinese goods as “fair.” That figure, well above the earlier floated 50–60% range, has rattled risk appetite and triggered a wait-and-see mood among global investors.

Mixed Signals and Market Reaction

The Dow Jones (-0.29%) and S&P500 (-0.07%) edged lower into the weekend, with the NASDAQ flat, as traders processed conflicting cues:

Trade optimism from negotiators
A hawkish media line from Trump
A dovish tone from the Fed

The VIX fell -2.6% to 21.90, suggesting a temporary easing of fear, but investors are clearly preparing for volatility around the joint statement.

Trump’s Tariff Brinkmanship: Strategic or Sabotage?

By suggesting an 80% tariff while negotiations are underway, Trump is playing a familiar game of media brinkmanship — float the extreme, then “negotiate” back to a compromise.

But this time, markets may not be so forgiving.

Investors had priced in a “mild” tariff scenario (50–60%)
Anything less than 80% now feels like a “loss” politically
If the final number still exceeds consensus, markets could sell off on disappointment

This is classic anchoring psychology — and Trump just moved the anchor higher.

Fed Message: Stay Patient, Stay Data-Driven

Meanwhile, a string of Fed speakers last week emphasized a “wait-and-see” policy stance, reiterating that rate cuts aren’t imminent. The Fed is clearly concerned about global uncertainty, inflation stickiness, and volatile geopolitical headlines — from US–China trade to Middle East energy risks.

This tone is keeping the USD range-bound, with some softness late Friday as optimism cooled.

FX and Macro Takeaways

CAD weakened after soft April jobs data (unemployment rose to 6.9%), supporting a bullish bias in AUDCAD.
EURUSD saw whipsaw moves, climbing from 1.1200 to 1.1293 before gapping lower to 1.1185 — largely short-covering and rebalancing.
USDJPY tested 146.30 with upside risk to 147.90 as yield differentials widened.
Safe havens like CHF and gold (XAUUSD) sold off slightly as hopes of easing US–China tensions grew.
Gold support seen at $3213 and $3162.

This Week’s Market Watchlist

Tuesday (May 13): US April CPI – The market’s inflation obsession continues
Thursday (May 15): US Retail Sales and Walmart Q1 earnings – a proxy for the American consumer
UK Data Blitz: Jobs and GDP, plus multiple speeches from the Bank of England’s MPC at the Watchers’ Conference. BoE Chief Economist Huw Pill speaks Tuesday at 9:45am UKT.

Investor Insights: Read Between the Lines

This moment is not about headlines — it’s about interpretation.

If tariffs land below 80%, markets could breathe relief — temporarily
If no joint statement emerges, markets may interpret silence as deadlock
If the Fed maintains its cautious tone, it may support equities, but cap USD upside

Positioning for uncertainty — not resolution — is the smarter play this week.

Conclusion

Markets aren’t reacting to events anymore. They’re reacting to the language around events. With tariff rhetoric rising and macro data looming, this is a crucial week for tactical repositioning.

At Tigris Asset Management, we remain selectively risk-on, with a defensive posture in FX and commodities, while preparing for volatility triggered by political missteps or inflation surprises.