On Tuesday, the United States and China officially began reciprocally levying port fees on each other’s ships and shipping companies. These companies transport a variety of goods ranging from holiday toys to crude oil, marking maritime transport as a key battleground in the trade war between the world’s two largest economies.
Despite the escalating conflict, contradictory signals have emerged in the global markets. On Sunday, U.S. President Trump reassured the markets on Truth Social, stating, “Don’t worry about China, everything will be fine!” This statement prompted a strong rebound in Wall Street stocks on Monday, recovering most of the losses from the previous week. Asian markets also saw mixed movements, indicating divergent views among investors on the outlook.
Earlier this year, the Trump administration announced plans to impose port fees on ships related to China to counter the Communist Party’s control over the global maritime industry and boost the U.S. shipbuilding sector. A previous investigation initiated during the Biden administration concluded that through unfair policies and practices, China had deliberately sought to dominate the global shipping, logistics, and shipbuilding industries.
The U.S. is set to begin collecting these fees on Tuesday. Analysts predict that Chinese container shipping company COSCO may face the largest impact, with the container shipping industry potentially incurring around $3.2 billion in costs due to the U.S. fees in 2026, with nearly half borne by COSCO.
Last week, Beijing retaliated by announcing plans to levy port fees on ships related to the U.S., starting from Tuesday as well. Jefferies analyst Omar Nokta noted that approximately 13% of global oil tankers and 11% of container ships in the global fleet will be affected by these measures.
The port fee dispute is just the tip of the iceberg in the latest round of escalation. Following the end of the national holiday, China announced a new framework restricting the export of rare earths. Products containing Chinese rare earths, accounting for at least 0.1% of the product’s value, regardless of where they are manufactured globally, will require approval from China’s Ministry of Commerce before exportation.
Teneo analyst Gabriel Wildau warned in a report on Saturday that such tit-for-tat measures could spiral into a predicament of escalating shipping fees, impacting global freight traffic.
Despite the renewed tensions between the U.S. and China, there is still a glimmer of hope for diplomatic resolution in the markets. Nomura Securities’ Chief China Economist Ting Lu suggested that negotiations might still be ongoing, as some of the announced measures are set to take effect after the APEC summit in Korea.
However, analysts caution against excessive optimism, as the foundation of trust between the U.S. and China has been eroded and any solutions proposed are likely short-term patches rather than long-term changes to the competitive dynamics between the two countries.
Larry Hu, chief China economist at Macquarie, also noted in a report on Monday that the root cause of U.S.-China tensions lies in the lack of mutual trust.
A sharp escalation in tensions may lead to a spiral of punitive measures, potentially affecting global trade flows. While diplomatic solutions remain a possibility, the breakdown in trust between the two nations poses significant challenges for any lasting resolution.
In terms of market performance, on Monday, all three major U.S. indices rose, with the Dow, S&P 500, and Nasdaq climbing 1.29%, 1.56%, and 2.2% respectively, with the Nasdaq achieving its largest single-day gain since May 27.
On Tuesday, Asian stock markets showed mixed movements. Australia’s ASX200 slightly declined by 0.11%. South Korean stocks strengthened led by Samsung, with the KOSPI index rising by 1.65% at one point. The Nikkei Average fell by approximately 0.59%.
Taiwan’s stock market led the gains, with an initial increase of over 2%. The Hang Seng Index in Hong Kong also rose by 0.64%, while the Shanghai Composite Index increased by about 0.69%. Overall, the MSCI Asia-Pacific Index, excluding Japan, rose by approximately 0.5%.
In commodity markets, Brent crude oil rose by 0.4% to $63.56 per barrel. The recent OPEC report on oil production stated that with a broader OPEC+ alliance increasing production, the global oil supply is expected to roughly match demand next year, a change from the forecast of a supply shortage in 2026 made the previous month.
Gold rose by 0.7% to $4,138.39 per ounce, setting new highs for precious metals. Bitcoin fell by 0.9% to $114,789.90, while Ethereum dropped by 1.5% to $4,223.14.
Traders continue to anticipate an imminent interest rate cut by the Federal Reserve this month. According to the CME FedWatch tool, the market’s probability of a 25-basis-point rate cut during the Federal Open Market Committee (FOMC) meeting on October 29 stands at 97.8%, down slightly from 98.3% a day earlier.