USA – China: A Tactical Draw for the Next Year

SP500

Key zone: 6,850 - 6,930

Buy: 6,950 (on strong positive fundamentals); target 7,050-7,100; StopLoss 6,900

Sell: 6,850(on a confident breakout of the 6,900 level); target 6,700; StopLoss 6,900

As a result of a “fantastic” (according to Trump) 90-minute meeting, both sides reached a mutually beneficial “understanding” on issues including the supply of rare-earth materials, curbing fentanyl transit, and China’s purchase of U.S. agricultural goods. The duration of the “deal” — one year.

To recall: this summit took place six months after Trump imposed 145% tariffs on Chinese goods and Beijing retaliated with 125% tariffs on U.S. products, effectively creating a trade embargo.

Xi Jinping stated that China’s development goes hand in hand with America’s ambition to “make America great again.” The Chinese leader noted that while the two nations do not always see eye to eye, such differences are normal for the world’s leading economies.

Trump announced that China agreed to:

• intensify efforts to halt the flow of fentanyl into the U.S.;
• continue open and unrestricted exports of rare-earth metals, critical minerals, and magnets;
• suspend export controls on rare-earth materials for one year;
• begin purchasing American energy resources.

China assured the U.S. that there are no barriers to the supply of materials vital to American industry.

Both sides’ “energy teams” are expected to meet to discuss the potential for a large-scale oil and gas supply deal from Alaska.

Trump expressed great satisfaction that Xi Jinping approved large-scale Chinese purchases of soybeans, sorghum, and other U.S. agricultural goods. There is, however, no update regarding Blackwell Nvidia chip sales to China.

Both leaders confirmed that the Taiwan issue was not discussed.

Trump promised to reduce tariffs on Chinese goods imposed over the fentanyl dispute by 10%, to 47% (with a possible further 10% reduction later). Donnie plans to visit China in April next year, and Xi Jinping will visit the U.S. sometime afterward.

The agreement terms will be reviewed (and potentially adjusted) annually, though the deal will likely remain in force for longer than one year.

A pause has been reached in the trade war — a window during which both sides can strengthen their economic positions. No matter how energetically Trump presents it, the meeting’s outcome remains superficial and avoids core issues.

There is a deal, but the markets show little enthusiasm.

After the summit, U.S. stock futures and most Asian markets remained flat or slightly declined. Understandably so — so far, this is merely a “memorandum of intent.” A full-scale trade agreement and its implementation mechanism are still being drafted. Moreover, Beijing’s neutral tone and lack of visible excitement confirm the cautious nature of these talks.

So we act wisely and avoid unnecessary risks.

Profits to y’all!