Trump-Xi meeting: How did we get here?

US President Trump and Chinese leader Xi Jinping are set to meet, aiming to finalize a trade deal amidst persistent tensions over escalating tariffs, critical semiconductor access, and rare earth mineral controls. The high-stakes discussion is expected to include the finalization of TikTok's US operations sale, with potential concessions such as China delaying rare earth export curbs for tariff relief and increased US agricultural purchases in exchange for easing chip restrictions. While a fragile truce could temporarily stabilize global supply chains and tech sector dynamics, analysts caution that the underlying strategic rivalry suggests any agreement may only offer a temporary reprieve.

Analysis

The upcoming meeting between US President Trump and Chinese leader Xi Jinping aims to finalize a trade deal, with officials indicating a consensus to address mutual concerns and signaling a de-escalation of immediate tariff threats. This high-stakes meeting, occurring amidst a fragile truce, is seen as a pivotal moment to reset globalization in the post-COVID era, potentially stabilizing global trade dynamics.

Beyond tariffs, negotiations cover critical semiconductors and rare earth minerals. China's tightening of rare earth export controls underscores its strategic leverage, while its reported directive for local firms to avoid US chips and an anti-monopoly probe into Nvidia (NVDA: -0.4 sentiment) highlight a drive for technological self-reliance, benefiting domestic players like Alibaba (BABA: 0.4 sentiment).

Expected concessions include China delaying rare earth export curbs for lower tariffs and increased US agricultural purchases, exemplified by recent soybean cargoes. Xi is anticipated to seek relief from US chip restrictions, alongside the expected finalization of the TikTok US operations sale. While a deal could narrow immediate risks, analysts caution that the underlying strategic rivalry and erratic tariff policies suggest any truce may be temporary, reflecting a mixed and cautious sentiment.

Key Decisions for Investors

• Monitor the specifics of any trade agreement for clarity on tariff reductions and export control adjustments, particularly concerning semiconductors and rare earths
• Re-evaluate exposure to US semiconductor firms heavily reliant on the Chinese market given Beijing's push for technological self-reliance and negative sentiment around NVDA
• Prepare for continued geopolitical volatility and potential supply chain disruptions, as the underlying strategic rivalry suggests any trade truce may be fragile and temporary