News of U.S.-China Talks Tank the Japanese Yen

File image of Scott Bessent. Image: Official U.S. Government image.

News that trade talks will get underway has triggered a decline in the Yen.

It is reported midweek that China has agreed to sit down with the U.S. and discuss a trade deal aimed at lowering tariffs in both countries.

U.S. Treasury Secretary Scott Bessent and Chief Trade Negotiator Jamieson Greer will meet China's economic chief, He Lifeng, in Switzerland.

"My sense is this will be about de-escalation," Bessent said in a televised interview following the announcement of talks. "We’ve got to de-escalate before we can move forward."

"The Chinese side carefully evaluated the information from the US side and decided to agree to have contact with the US side after fully considering global expectations, Chinese interests and calls from U.S. businesses and consumers," said a spokesman from China's Commerce department.

It is the latest piece of progress in a de-escalation of global trade tensions, which is welcomed by global investors who hope that the measures will boost economic growth.

The Yen is a safe-haven currency that benefited when trade tensions spiked in the wake of Donald Trump's April 02 'Liberation Day' tariff announcements, which proved more severe than expected.

China has retaliated with significant tariffs, which threaten to freeze trade between the two countries.

Rising global stock markets coincide with notable JPY underperformance:

The trade talk announcement comes alongside the announcement of new stimulus measures from China, which are intended to ease the blow of U.S. tariffs which will lessen demand for Chinese exports.

In particular, China wants domestic demand to meet any shortfalls in global demand.

Beijing announced cuts to interest rates and announced a major liquidity injection in the run-up to the talks this weekend.

It also fixed the exchange rate of the Yuan lower, to maintain Chinese export competitiveness.

The U.S. imposed 145% tariffs on imported goods from China, with Beijing responding with a 125% duty on U.S. imports.