US-China Talk Hope Reignited, US Services PMI Falls

On April 23, 2025, the US and China appear to be entering a potential new phase of negotiation, with President Trump expressing optimism about reaching a deal that could lead to a substantial reduction in tariffs on Chinese imports.

However, the renewed optimism remains limited, as the US S&P Global Services PMI declined in April and came in below expectations.

Trump Softens on Tariffs, Signals Trade Talks

In a statement on Tuesday, President Trump acknowledged the severity of the current tariffs and announced his plan to “substantially” reduce them, while clarifying that they will not be eliminated entirely. Some tariffs will remain in place depending on China’s response in the upcoming trade talks.

While President Trump has publicly stated that the US is “actively” negotiating with China, US Treasury Secretary Scott Bessent clarified that no official talks have begun.

Currently, US tariffs on Chinese goods stand at 145%, with China imposing 125% tariffs on American imports. The White House is reportedly considering reducing these tariffs to a range between 50% and 65% as a goodwill gesture to ease tensions.

Although informal communications between the two countries are ongoing, no formal negotiations have been scheduled. Investors are closely monitoring developments, as the outcome of the trade dispute between the world’s two largest economies could have significant market implications.

US Services PMI Disappoints, Rising Price Raise Concerns

On the other hand, the latest S&P Global PMI data released on Wednesday points to a slowdown in U.S. business activity, which could have significant market implications.

• The S&P Flash Services PMI fell to 51.4 in April, down from 54.4 in March, indicating a cooling in the service sector.
• Meanwhile, the S&P Flash Manufacturing PMI edged slightly higher to 50.7, up from 50.2 in March.

US S&P Flash PMI Data; Source: S&P Global PMI

However, the overall Composite PMI, which combines both services and manufacturing, dropped to 51.2, down from 53.5 in March. This marks the lowest reading in 16 months, highlighting slowing momentum across the broader economy.

S&P Global US PMI Price Index; Source: S&P Global PMI

Meanwhile, the PMI input price indices also show the average prices charged for goods and services rose in April at the sharpest rate for 13 months, increasing especially steeply in manufacturing (where the rate of inflation hit a 29-month high) but also picking up further pace in services.

Cautious for Over-Optimism

Despite renewed optimism from potential U.S.-China trade talks, uncertainty still surrounds the U.S. economic outlook. The recent slowdown in business activity may suggest that the impact of tariffs is beginning to show, while rising prices continue to raise concerns about inflation.

SP500 Index,4-Hour Chart Analysis; Source: Ultima Market MT5

The S&P 500 gave up some of its recent gains on Tuesday, keeping the benchmark index below its key bearish territory between 5,500 and 5,440 resistance level.

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