The Shadow of the Washington-Beijing Phone Call on Capital Markets
According to the analysis and translation team of the Stock Information and Education Company, quoting CNBC, the recent phone conversation between Donald Trump, President of the United States, and Xi Jinping, leader of China, has had immediate and significant effects on capital markets on both sides of the Atlantic.
After the call, Trump, unlike in previous months, did not mention the difficulty of reaching a trade agreement with Beijing and described the trade deal as nearly completed. He emphasized: on a much larger scale, we are very close to an agreement.
This comes while the U.S. President in recent months consistently highlighted the difficulty and complexity of reaching a deal with Beijing. Nevertheless, Trump continued to emphasize the possibility of extending the tariff truce, which led Wall Street participants to view the potential deal as certain but with an uncertain timeline. In other words, financial markets remain suspended between hope for an agreement and uncertainty about the future.
Economic experts believe that the final outcome of the trade talks between Washington and Beijing will naturally have a broad impact on global capital markets. However, what heightens concerns is Trump's unpredictable character and the possibility of him returning to previous hardline positions, especially as the Taiwan issue has become a major variable in the negotiations.
Trump’s critics accuse him of over-negotiating and sacrificing security issues for economic interests. According to The Washington Post, Trump recently refrained from approving a $400 million military aid package to Taiwan; this action, the newspaper claims, was taken to facilitate trade talks with Beijing.
This decision sparked widespread criticism, and many U.S. politicians and analysts interpreted it as "sacrificing Taiwan’s security".
However, Trump dismisses these criticisms and considers them part of domestic political discourse. Nevertheless, this situation has increased the likelihood of serious involvement by Congress, particularly the U.S. Senate, in this dispute. Currently, the Taiwan issue has become a kind of benchmark for measuring the White House’s determination to reach a final trade agreement with Beijing.
Since the 1970s, with the formal recognition of the One-China policy, the United States has been committed under the Taiwan Relations Act (1979) to strengthen Taiwan's defense capabilities. The sale of U.S. weapons to Taiwan has always been a major source of tension between Washington and Beijing.
During Trump’s presidency (2017-2021), these tensions intensified. He launched a trade war with China and approved the sale of advanced military equipment to Taiwan, including F-16 Viper fighter jets and Patriot missile systems.
Nevertheless, delays or conditionality in certain military aid to Taiwan occasionally drew waves of criticism against the Trump administration. Recently, his actions have again raised the question of whether the White House sacrifices the security of its allies for economic agreements.
Despite positive signals from Trump, the capital markets in the U.S. and Europe remain uncertain. Some analysts consider reaching a final agreement with Beijing more likely than failure, but the timeline and exact conditions remain unclear.
Aswath Damodaran, distinguished professor at NYU Stern School of Business, told CNBC’s Closing Bell: the market is currently held up by earnings figures. However, as long as these indicators fluctuate due to Trump’s policies, there is no catalyst for stabilizing the capital market. This situation will affect all companies and stocks.
Experts believe that the current global financial market environment is moving between two opposing poles: hope for a trade deal that can create stability, and concerns over Trump’s unpredictable policies, which continue to cast a heavy shadow over the global economy.