As Xi meets Trump, who’s winning their trade war?

Ahead of Xi Jinping's White House meeting with Donald Trump, the US-China tariff truce due to expire November 10 remains fragile, with average US tariffs on Chinese goods at 36.5% and Chinese tariffs on US goods at 31% as of July 2026. Bilateral trade fell 29% to $415bn in 2025, while US-China trade declined another 14.5% year-on-year in January-July 2026; however, China's global exports rose 6.1% in 2025 and its trade surplus reached roughly $1.2tn. The US goods deficit widened 2.8% to $1.235tn in 2025 and increased 17.4% year-on-year in May-July 2026, indicating tariffs have shifted supply chains and reduced bilateral trade without lowering the overall US deficit.

Analysis

The relevant market signal is not bilateral deficit compression but trade rerouting: import demand is being displaced through ASEAN and Mexico rather than eliminated. That preserves volume for global contract manufacturers and logistics networks while raising origin-compliance, customs-audit and working-capital risk. CELH? No—more direct beneficiaries are CELH? Not applicable. Jabil (JBL), Flex (FLEX), and Celestica (CLS) have relatively advantaged non-China manufacturing footprints, but their premium multiples leave them vulnerable if the November 10 truce deadline produces broad anti-transshipment enforcement rather than a negotiated extension.

Domestic metals remain the clearest near-term pricing umbrella. Nucor (NUE), Steel Dynamics (STLD), and Century Aluminum (CENX) benefit if import barriers remain binding, while downstream users—especially GM, F, CAT and industrial distributors—face either margin compression or demand destruction from higher equipment prices. The second-order risk is that tariff protection supports domestic benchmark prices without generating sufficient incremental end-demand, producing an inventory-led rally that reverses quickly if manufacturing PMIs weaken.

Critical-mineral restrictions are a more potent negotiating lever than tariff schedules because a disruption can halt production at high-value defense, EV and electronics customers despite modest bill-of-material cost. MP Materials (MP) is the liquid US strategic-supply proxy, but its valuation is highly sensitive to policy support and execution at downstream processing; it should be treated as an event-driven hedge, not a clean earnings compounder. A conciliatory summit outcome would likely unwind scarcity premiums immediately, whereas a failed truce can extend supply-chain risk into 2027 as OEMs qualify alternative magnet sources.

Consensus appears too focused on headline tariff rates and too dismissive of enforcement. A truce extension would be modestly risk-on, but it does not remove entity-list, technology-control, and sanctions risk; therefore semiconductor equipment and AI-hardware supply chains should not receive a full multiple re-rating solely on diplomatic optics. The thesis is falsified by a verifiable truce extension with explicit rare-earth licensing commitments, no new origin rules, and falling US steel/HRC pricing over the following 4-8 weeks.

Key Decisions for Investors

• Initiate a 1-3 month pair: long JBL and FLEX versus short a basket of China-dependent discretionary importers via XRT. Size modestly ahead of the November 10 deadline; target 8-12% relative upside if supply-chain diversification retains its premium, with a 5% pair stop if a broad tariff rollback and relaxed origin enforcement are announced.
• Buy NUE or STLD on weakness as a 1-3 month tariff-enforcement trade; prefer STLD for higher operating leverage. Take profit if US HRC pricing fails to firm within six weeks or if forward manufacturing indicators deteriorate further, as protected pricing without volume growth is not durable.
• Use MP as a small tactical long or buy 3-6 month upside calls only if negotiations show no explicit critical-minerals export-license framework. The payoff is asymmetric under escalation, but exit on a binding supply agreement or evidence that downstream processing ramp/guidance slips.
• Avoid adding broad SMH exposure on summit optimism. Maintain hedges in AI hardware through 3-6 months because selective export-control changes can shift revenue between suppliers without expanding total addressable demand; a durable hedge unwind requires formal licensing clarity and stable China revenue guidance from NVDA, AMAT and LRCX.