China’s Vice Premier He Lifeng described the recent talks with US officials as an important first step in stabilising trade relations. Both countries agreed to establish a mechanism for further discussions led by US Treasury Secretary Scott Bessent and He Lifeng.

While specific measures were not announced immediately, Bessent committed to sharing details soon and promised a joint statement. He Lifeng emphasised the mutual benefit of China-US trade and expressed Beijing’s readiness to manage differences and expand cooperation.

AUD USD Pair Performance

The AUD/USD pair experienced a slight increase of 0.10% to trade at 0.6417 at the time of reporting. Generally, a trade war involves economic conflicts due to protectionism, leading to tariffs and increased import costs.

The US-China trade war escalated in 2018 with the US imposing tariffs on China, which retaliated with its own. Although the conflict eased slightly with the 2020 Phase One trade deal, tensions resurfaced with Donald Trump promising 60% tariffs during his 2024 campaign. This resumption of trade tensions could disrupt global supply chains and affect the Consumer Price Index inflation.

This initial outreach between Washington and Beijing, framed by He as a starting point for improved communication, represents a potential pivot in an otherwise strained dynamic. The willingness to set up structured channels for discussion suggests the groundwork is being laid for more consistent dialogue, though no immediate policy changes were announced.

Bessent’s Commitment

Bessent’s commitment to publishing a joint statement and providing more detail shortly adds weight to this being more than ceremonial. It signals intent to flesh out substance, which may later inform capital flow decisions or trade policy adjustments. He pointed toward areas of mutual benefit and noted China’s apparent intention to move forward cooperatively, managing friction where necessary. That underscores not just a diplomatic moment, but also one that implicitly acknowledges shared economic dependencies—particularly in manufacturing, technology, and commodities.

From our perspective, what matters now is how and when this dialogue develops into action. Future releases from Bessent’s team are likely to give markets updated direction. Any hint of tariff moderation or relaxation of trade frictions could influence options positioning in commodities, currencies, and industrial sectors with high trade exposure.

We watched the Aussie dollar nudge up to 0.6417, a modest gain, yet it comes amid a tentative backdrop. The move may appear minor in isolation, but it reflects small shifts in risk sentiment—especially for economies like Australia’s with deep economic ties to both nations. Traders depending on medium-term macro indicators should take note of how correlated asset classes, such as industrial metals or shipping indices, behave over the next few weeks in response to Washington-Beijing developments.

It would be shortsighted to discount the implications of campaign rhetoric either. With tariffs once again forming a part of domestic political strategies—particularly proposals for a 60% levy against Chinese imports—there could be renewed activity around cost-sensitive sectors. This will likely revive supply chain hedging activity and spark volatility near key CPI releases. It reintroduces the long tail risk of inflation persistence, particularly if retaliatory moves impact goods priced in dollar terms.

Rather than focusing solely on the dollar-yuan or equity moves, those trading derivatives would benefit from mapping expected volatility around scheduled statements or policy releases from either bloc. There’s increasing probability of realignment in implied volatilities, particularly in FX, semiconductors, and possibly grain markets that rely on forward trade flows.

Our strategy this week includes close attention to CME’s options volumes and any abnormal positioning in metals or consumer discretionary sectors. The implied expectations from derivatives pricing could show us more than official statements will, especially in a moment where direction is being signalled but not yet acted upon.

Create your live VT Markets account and start trading now.