U.S. President Donald Trump and China’s President Xi Jinping are set to hold talks amid ongoing trade tensions between the two countries. Speculation is mounting that the leaders may soon engage in discussions to address the trade war. Trump recently accused Beijing of violating last month’s agreement to reduce significant tit-for-tat tariffs.
He threatened to double levies on steel and aluminum imports from China. The news of a potential phone call between Trump and Xi helped ease fears in the markets. However, a risk-off tone persists, exacerbated by the collapse of the Dutch governing coalition and signs of weakness in the world’s two largest economies.
Hong Kong and Shanghai stock markets closed higher on Tuesday. Europe’s top indices mostly steadied by midday. The Dutch political landscape saw a significant shift as far-right leader Geert Wilders withdrew his party from the government over immigration disputes.
This is likely to lead to snap elections and political instability in the Netherlands, the EU’s fifth-largest economy. Eurozone inflation eased in May to its lowest level in eight months, below the European Central Bank’s 2% target rate.
Trump and Xi trade talks loom
This comes amid expectations that the ECB will cut eurozone interest rates this week, putting additional pressure on the euro. Oil prices edged higher following Monday’s surge. This was triggered by OPEC+ increasing output less than expected and geopolitical tensions fueled by a Ukrainian strike on Russian bombers.
Officials from the United States and China are scheduled to meet on the sidelines of an OECD ministerial meeting in Paris on Wednesday. The OECD has slashed its 2025 growth outlook for the global economy to 2.9 percent from 3.1 percent. It also reduced the US economic growth forecast to 1.6 percent, down from an earlier estimate of 2.2 percent.
OECD chief economist Alvaro Pereira expressed concern, stating that “substantial increases in trade barriers, tighter financial conditions, weaker business and consumer confidence, along with heightened policy uncertainty, will all have marked adverse effects on growth if they persist.”
Data on Tuesday indicated that Chinese factory activity shrank at its fastest pace since September 2022. Wall Street experienced tech-led gains on Monday following better-than-expected earnings from chip giant Nvidia. US Commerce Secretary Howard Lutnick voiced optimism about reaching a trade deal with India “in the not too distant future.”
President Trump’s proposed tax legislation, termed the “big, beautiful bill,” remains a focal point.
It features tax cuts estimated to add up to $3.0 trillion to the national debt amid ongoing concerns about the country’s fiscal health. Intense debates have begun in the US Senate over the policy package, which includes budget cuts projected to strip healthcare access from millions of low-income Americans.
