Trump says 'extremely hard' to make a deal with China's President Xi Jinping as trade talks stall

Trade tensions between the U.S. and China are escalating as Trump expresses difficulty in making deals with Xi Jinping, despite White House suggestions of a potential call this week. China's Foreign Minister Wang Yi criticized recent U.S. measures as undermining China's interests, while the U.S. ambassador emphasized trade, fentanyl, and immigration concerns; both sides blame each other for violating a recent trade agreement, with disagreements over rare earth exports and technology access. Analysts suggest China will only agree to a call if assured of no surprises from the U.S., highlighting the fragile state of bilateral relations.

Analysis

U.S.-China trade relations are under increasing strain, characterized by President Trump's public statements highlighting the difficulty in reaching a deal with President Xi Jinping, which contrasts with earlier White House suggestions of an imminent high-level call. U.S. Treasury Secretary Scott Bessent confirmed that trade talks are 'a bit stalled,' necessitating leader-level intervention to break the impasse. Concurrently, China's Foreign Minister Wang Yi has criticized recent U.S. 'negative measures' as 'groundless' and undermining China's legitimate interests, urging the U.S. to 'meet China halfway.' This diplomatic tension is further evidenced by both nations accusing each other of violating a May 12 trade agreement, which stipulated a 90-day suspension of most tariffs and a repeal of trade countermeasures. Specific unresolved issues include China's ongoing restrictions on rare earth exports, U.S. efforts to limit China's access to advanced technology, and the recent U.S. decision to revoke visas for Chinese students. Market analysis from Evercore ISI, via Neo Wang, suggests Beijing will likely only agree to a presidential call if there are assurances against 'surprises' from the U.S., indicating deep-seated mistrust. The prevailing 'moderately negative' sentiment and 'uncertain' tone, coupled with a market impact score of 0.6, signal a heightened risk of market volatility stemming from these geopolitical developments.

Key Decisions for Investors

• Investors should closely monitor diplomatic communications for any confirmation or substantive outcome of the potential Trump-Xi call, as this event could significantly influence market sentiment and direction.
• Given the 'moderately negative' sentiment, 'uncertain' outlook, and specific unresolved disputes over critical areas like rare earths and technology access, investors with exposure to sectors sensitive to U.S.-China trade should evaluate hedging strategies to mitigate potential downside risks.
• A cautious stance is warranted for new capital allocations into assets highly dependent on stable U.S.-China bilateral relations until there are clear indications of de-escalation or concrete progress in resolving the outlined points of contention.