Trump-Xi Trade Truce Offers Short-Term Relief, But Markets Remain Wary of Structural Resolution

Gerik

Summary:

Trump’s post-summit announcement to cut tariffs on Chinese goods from 57% to 47% in exchange for fentanyl curbs and resumed soybean purchases was welcomed as a tactical easing of U.S.-China tensions....

Tariff Reduction Offers Political Win, Limited Economic Shift

President Donald Trump’s decision to reduce tariffs on Chinese imports from 57% to 47% following his meeting with President Xi Jinping was framed as a significant diplomatic win. The deal includes renewed Chinese soybean purchases, the temporary suspension of rare earth export restrictions, and promises to combat fentanyl trafficking. Yet analysts and market participants quickly pointed out that this latest truce is more symbolic than transformative, especially for investors looking for clarity on long-term trade policy.

Market responses to the summit were mixed and largely muted. Kyle Rodda of Capital.com noted that most of the concessions had already been priced in earlier in the week, especially the fentanyl-related tariff cuts. The absence of a complete tariff rollback, which some investors had hoped for, resulted in only a lukewarm market reaction. Similarly, Vincent Chan from Aletheia Capital pointed out that the outcome may reduce China's relative disadvantage but does not fundamentally alter the strategic rivalry between the two powers. His observation that "any agreement will be unstable in nature" encapsulates widespread market skepticism.

Agriculture and Industrial Concessions Lead the Agenda

As expected, agriculture particularly soybeans featured prominently. This aligns with Trump’s political need to deliver wins to U.S. farmers. Meanwhile, rare earth elements remained a central bargaining chip. The one-year pause in China’s licensing regime is seen as a temporary reprieve rather than a genuine policy reversal. Tareck Horchani of Maybank Securities framed the outcome as a "relief rally" rather than a “structural reset,” noting that the deeper issues in technology access and supply chains remain unresolved.

While the summit addressed surface-level trade tensions, critical questions on export restrictions for advanced semiconductors, such as Nvidia’s Blackwell AI chips, were deferred or avoided altogether. Trump’s post-meeting remarks confirmed that Nvidia-related negotiations had not been finalized, suggesting the U.S. remains cautious on opening access to sensitive technology despite hints at possible mediation. This hesitation reflects the national security concerns still underpinning U.S. policy, particularly in areas where strategic rivalry remains pronounced.

Regional Responses Reflect Limited Optimism

From Shanghai to Kuala Lumpur, analysts across Asia echoed the view that the truce, while stabilizing in the near term, falls short of addressing structural decoupling. Muhammad Saifuddin of Kenanga Investment Bank called it “a tactical pause,” noting that while global supply chain sentiment may temporarily stabilize, the long-term path still leans toward economic bifurcation. This view is reinforced by Emanuel Datt of Datt Capital, who expects a short-term equity rally in high-beta sectors like tech and logistics but also warned that gold and rare earth equities could underperform as investor hedges unwind.

A recurring theme among analysts was the absence of a formal, enforceable agreement or joint communiqué. Dickie Wong of Kingston Securities voiced concerns about the credibility of follow-through, warning that markets may experience a post-summit “anti-climax” if no clear mechanism for implementation emerges. Without codified commitments or timelines, investors may treat the outcome as a headline-driven reprieve rather than a reliable change in direction.

The Trump-Xi summit delivered short-term political optics and a temporary easing of trade tensions, but market participants remain cautious. With tariffs modestly reduced and a handful of export restrictions delayed, the deal functions more as a managed pause than a reset of U.S.-China economic relations. Structural issues from advanced technology access to industrial subsidies and geopolitical influence continue to define the relationship. For now, the trade war has cooled, but it remains far from concluded. Investors and policymakers alike will need to remain vigilant as both countries continue to compete for economic and strategic primacy in a bifurcating global order.

Source: AP

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