China hints at possible thaw with U.S. in evaluating trade talks

China said it is assessing the possibility of trade talks with the U.S., the first sign since Donald Trump hiked tariffs last month that negotiations could begin between the two sides.

China’s Commerce Ministry said in a Friday statement that it had noted senior U.S. officials repeatedly expressing their willingness to talk to Beijing about tariffs, and urged officials in Washington to show “sincerity” toward China. 

“The U.S. has recently sent messages to China through relevant parties, hoping to start talks with China,” the ministry added. “China is currently evaluating this.”

Futures on the S&P 500 Index erased early losses in Asia soon after the statement, and a gauge of regional equities rallied to its highest level in more than a month. The Hang Seng China Enterprises Index finished almost 2% higher in Hong Kong, while mainland markets were shut due to a holiday. 

The statement signaled the stalemate between the world’s two largest economies could shift, after Trump hiked U.S. tariffs to the highest level in a century and Beijing retaliated in kind. Trump has repeatedly said President Xi Jinping needs to contact him in order to begin tariff talks. Earlier this week, Treasury Secretary Scott Bessent said it’s up to Beijing to take the first step to de-escalate the dispute.

John Gong, a former consultant to China’s Commerce Ministry, likened the latest gesture to “the first rain after a long drought.” It suggests “there’s a go-ahead from the very top of the leadership in China,” according to Gong, who’s now a professor at the University of International Business and Economics in Beijing.

“They are preparing for the negotiation, who’s going to lead the negotiation, what would be the strategy, what is the model like to deal with Washington,” he told Bloomberg Television. “All these things are currently probably being intensively debated and discussed right now.”

The economic fallout from the confrontation may be giving new momentum to efforts to bring both sides to the negotiating table. The U.S. economy contracted at the start of the year largely because of a monumental surge of imports to get ahead of the tariffs that have roiled global financial markets and caused consumer confidence to plummet.

In China, factory activity slipped into the worst contraction since December 2023, the official manufacturing purchasing managers’ index showed this week. New export orders fell to the lowest since December 2022 and recorded the biggest drop since April that year, when Shanghai entered a citywide pandemic lockdown. 

But hurdles still lie ahead. Beijing has been looking for the U.S. to appoint a point person for talks who has Trump’s support and can help prepare a deal that the American president and the Chinese leader can sign when they meet.

And while countries like India and Japan seek out their own agreements with the U.S., China risks finding itself increasingly isolated as the sole major economy not to mount a campaign to strike a deal.

“The high level of reciprocal tariffs on China is not sustainable, so the market expects the U.S. and China to start negotiating at some point,” said Woei Chen Ho, an economist at United Overseas Bank Ltd. “The beginning of negotiations will likely drive market volatility again because it is not expected to be plain sailing.”

A surprise reshuffle by Trump on Thursday may complicate bilateral relations by expanding the portfolio of Secretary of State Marco Rubio, the first person in his post to be sanctioned by Beijing. The U.S. president announced Rubio will serve as interim national security adviser while keeping his job as secretary of state. Michael Waltz, his current national security adviser, is set to be nominated to be the next US ambassador to the United Nations.

The dual role created for Rubio will amplify his voice on issues of key concern to Beijing including Taiwan, a self-ruled island democracy that China claims as its territory. The top U.S. diplomat has previously pledged to address Beijing’s “destabilizing actions” in the South China Sea. 

Speaking in an interview with Fox News’ Sean Hannity broadcast on Thursday night, Rubio said China is looking for a “short-term accommodation” with the U.S. and claimed the duties are taking a huge toll on its economy. “The Chinese are reaching out,” Rubio said. “They want to meet, they want to talk.”

Representatives for the White House, Office of the U.S. Trade Representative and the departments of Treasury and Commerce didn’t immediately respond to requests for comment.

Rubio’s increasing prominence in the Trump administration is unlikely to unsettle ties given Commerce Secretary Howard Lutnick’s importance and the involvement of Trump himself, according to Frank Lavin, a former U.S. undersecretary of commerce for international trade. 

“There will be some kind of conversation that will start and I think that will start within a few days,” he said on Bloomberg Television. “Both sides want some kind of resolution or at least a reduction in tension.”

While expressing a newfound openness to talks, China’s Commerce Ministry framed its statement Friday as being consistent with Beijing’s previous position. As a condition to negotiations, it asked the U.S. to “show its sincerity and be prepared to correct its wrong practices” by scrapping the unilateral tariffs. 

“If we fight, we will fight to the end; if we talk, the door is open,” it said. “What China wants to emphasize is that in any possible dialogue or talks, if the United States does not correct its wrong unilateral tariff measures, it means that the United States has no sincerity at all and will further damage the mutual trust between the two sides.”

This story was originally featured on Fortune.com