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US President Donald Trump’s whirlwind Asia tour will reach its high point on Thursday, with his much-anticipated meeting with Chinese President Xi Jinping -- the first since Trump began his second term.

Globally, market participants are contemplating whether the encounter could lay the foundation for a fresh trade détente between the world’s two largest economies. On Thursday, US equity benchmark Dow Jones Industrial Average (DJIA) gave up initial gains of as much as 0.7 per cent to end 0.2 per cent lower, even as the Fed announced a widely expected rate cut of 25 basis points.

However, the Dow has staged several bouts of gains ever since Trump started speaking more positively about China. In one trading session alone, it jumped by about 1.3 per cent, as investors grew hopeful that tensions between the two countries might cool and companies tied to global trade could gain.

The White House has projected confidence that the two leaders could sign a broad framework deal to ease trade tensions that have whipsawed global markets since early 2025. Trump, currently wrapping up his five-day tour in South Korea after attending the ASEAN summit in Malaysia and meeting Japan’s new Prime Minister Sanae Takaichi, will meet Xi on the sidelines of an Asia-Pacific economic summit, October 30.

According to US officials, negotiators have already finalised a draft framework that would pause new American tariffs and ease Chinese export controls on rare earth minerals--a critical step toward restoring balance in global supply chains.

“I have a lot of respect for President Xi and we are going to, I think, come away with a deal,” Trump told reporters aboard Air Force One, signalling a rare conciliatory tone and adding that he plans to visit China “in the earlier part of 2026.”

Global markets have seen sharp swings through 2025 as the US-China trade conflict moved from tariff escalation to tentative reconciliation ahead of the Xi-Trump summit.

In early April, markets were hit hard after Trump’s April 2 order imposing steep reciprocal tariffs averaging 34 per cent and up to 54 per cent on key Chinese imports, with threats to raise them to as high as 145 per cent by mid-month. The result was a historic two-day market collapse.

On April 3, the Dow Jones Industrial Average fell 1,679 points (3.98 per cent) to 40,545.93, the S&P 500 declined 274.45 points (4.84 per cent) to 5,396.52, and the Nasdaq Composite dropped 1,050 points (5.97 per cent) to 16,550.60. Japan’s Nikkei 225 was down 2.77 per cent. Losses deepened the next day, with the Dow down another 2,231 points (5.5 per cent), the S&P 500 falling 5.97 per cent, and the Nasdaq down 5.82 per cent. The two-day slide wiped out nearly 10 per cent of US market value, while India’s Nifty 50 fell 400 points (1.5 per cent), the Shanghai Composite lost 60 points (1.5 per cent), and the MSCI Asia Pacific Index dropped nearly 5 per cent.

By April 9, sentiment had sunk further as trade fears persisted. The Dow fell another 1,014 points (2.5 per cent), while the S&P 500 and Nasdaq dropped 3.46 and 4.3 per cent respectively--their weakest levels since 2022.

A turnaround came in mid-May after Washington and Beijing reached a 90-day tariff truce in Geneva, holding US tariffs at 30 per cent and China’s at 10 per cent. The news triggered a broad rebound: the Dow gained 1,161 points (2.8 per cent), the S&P 500 rose 3.3 per cent, Japan’s Nikkei 225 climbed 1.7 per cent, and Asian markets followed with the MSCI Asia Pacific up 2 per cent, the Nifty 50 up 1.2 per cent, and the Shanghai Composite up 1.3 per cent.

Renewed tariff threats in early October again unsettled markets. On October 10, the Dow lost about 870 points (1.9 per cent), the S&P 500 dropped 2.7 per cent, and the Nasdaq fell 3.6 per cent on reports of potential 100 per cent tariff hikes.

On October 27, global equities rallied as Wall Street led the surge and Asia-Pacific markets followed. The Dow Jones Industrial Average rose 337.47 points, or 0.71 per cent, to 47,544.59. The S&P 500 advanced 83.47 points, or 1.23 per cent, to 6,875.16, its first close above 6,800. The Nasdaq Composite gained 432.59 points, or 1.86 per cent, to 23,637.46.

China’s Shanghai Composite Index ended 1.2 per cent higher, its highest close in more than a decade, nearing the 4,000 level on optimism over a potential US–China trade deal. Japan’s Nikkei 225 jumped 2.46 per cent to 50,512.32, lifting year-to-date gains to 26.6 per cent. MSCI’s broad Asia-Pacific index rose 1.3 per cent to a record peak.

In India, the Nifty 50 closed at 25,966.05, up 170.9 points or 0.66 per cent for the day.

The rebound underlined what analysts call the “TACO effect”-- sharp drawdowns on tariff escalation followed by relief rallies on negotiation progress. As investors await the Xi-Trump meeting on the APEC sidelines in South Korea on October 30–31, sentiment remains cautiously optimistic that talks could extend the current rally and stabilise trade-sensitive assets into 2026.

Investors have seen this pattern before. During previous rounds of trade tensions, Trump’s aggressive tariff threats often caused sharp market drops, only to be followed by relief rallies when talks resumed. Analysts have come to call this the “TACO” effect — short for “Trump Always Chickens Out.”

Shrishti Bisht is a journalist at Zee Biz, where she covers a wide range of topics from IPOs, startups, and market trends to global developments and economic shifts shaping the