Trump and Xi break the ice in long-awaited call, agree to restart trade talks

President Trump and President Xi Jinping held a phone call, leading to the resumption of trade talks between the U.S. and China. Trump indicated progress on the critical issue of rare earth minerals, a key factor in the prior breakdown of trade negotiations. While Chinese state media confirmed the call and the resumption of talks, they also urged the U.S. to remove "negative measures" against China, highlighting remaining points of contention, including export controls on semiconductors.

Analysis

The resumption of U.S.-China trade talks, following a one-and-a-half-hour phone call between President Trump and President Xi Jinping described by Trump as "very good," signals a moderately positive development with a reported market impact score of 0.6. A key area of discussion, and apparent progress, involves critical rare earth minerals, an issue Trump noted was "complex stuff" and had previously led to the near collapse of a 90-day trade truce under which tariffs had been lowered by 115 percentage points due to China's alleged failure to ease restrictions. While Chinese state media confirmed the call, which it stated was initiated at Trump's request, and the restart of dialogue as "the only correct choice," emphasizing China's earnest execution of prior agreements, significant friction points remain. Beijing has explicitly called on the Trump administration to "remove the negative measures taken against China," referencing prior criticisms of U.S. export controls on semiconductors and the halting of chip design software exports. This indicates that while dialogue has restarted, substantial hurdles persist, further underscored by President Trump's abrupt reversal on the entry of international students to Harvard, moving from an executive order suspending entry to stating "Chinese students are coming, no problem" within hours, highlighting potential policy volatility.

Key Decisions for Investors

• Investors should view the restarted US-China trade talks as a moderately positive development, potentially reducing near-term tariff risks, but maintain a cautious stance given outstanding issues like semiconductor controls and China's demand for the removal of 'negative measures'.
• Monitor upcoming negotiations closely for concrete progress on rare earth mineral access and any changes to existing tariffs or export controls, as these will be key indicators of the talks' substance and market impact.
• Sectors with high exposure to US-China trade relations, particularly technology (semiconductors), industries reliant on rare earth minerals (e.g., EV batteries, advanced electronics), and those sensitive to tariff fluctuations, warrant close attention for potential volatility and shifts in outlook based on negotiation outcomes.