Asia markets surge as US-China trade tensions ease

October 21, 2025 (MLN): Asia markets extended gains on Tuesday as easing US-China trade tensions and renewed investor optimism sent regional markets higher, with Tokyo reaching a fresh record amid Japan’s impending change in leadership.

Markets across the region were buoyed by signs of a thaw between Washington and Beijing after a turbulent few weeks sparked by US President Donald Trump’s threat to impose 100%  tariffs on Chinese goods in response to new rare earth export restrictions, as APP reported.

Trump has since struck a more conciliatory tone, expressing optimism ahead of his upcoming meeting with Chinese President Xi Jinping at the APEC summit in South Korea. “I want to be good to China. I love my relationship with President Xi. We have a great relationship,” Trump said Monday, adding that he was focused on achieving a “fair” trade deal and downplaying concerns over a potential conflict involving Taiwan.

The remarks helped lift Wall Street overnight, with a tech-driven rally pushing major indexes back toward record highs. “Markets are travelling on ‘high hopes’ for a thaw in US-China relations, with President Trump listing rare earths, fentanyl and soybeans as top issues ahead of trade talks,” said Rodrigo Catril, senior FX strategist at National Australia Bank.

Following the upbeat US session, Hong Kong jumped more than one percent, while Shanghai, Singapore, Seoul, Taipei, Manila, Sydney and Jakarta also traded firmly in positive territory.

In Japan, the Nikkei climbed more than one percent to a new all-time high after Monday’s 3.4% surge. Sentiment in Tokyo was lifted by news that Japan is set to welcome its first female prime minister, Sanae Takaichi, who reached a deal to form a new coalition government.

The agreement helped ease political uncertainty following the Komeito party’s recent split from Takaichi’s Liberal Democratic Party.

Investors have responded positively to Takaichi’s leadership prospects, as she has previously supported aggressive monetary easing and expanded fiscal spending policies reminiscent of her mentor, former premier Shinzo Abe.

Meanwhile, attention remains on Beijing, where Chinese leaders are holding a four-day policy conclave expected to address sluggish consumer spending and persistent challenges in the property sector.

The meeting follows third-quarter data showing China’s economic growth was in line with expectations but the slowest in a year.

In corporate news, Australian rare earth producers rallied after Trump and Prime Minister Anthony Albanese agreed to boost shipments of the critical minerals to the US. Hastings Technology Metals gained nearly four percent, Lynas Rare Earths advanced close to 5%, and Iluka Resources surged more than nine percent.

Overall, investors appear increasingly confident that a softening in trade tensions and renewed policy stability in Japan could sustain the region’s market momentum in the near term.

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