Trump-Xi Truce in South Korea - A Fragile Pause for Markets

The U.S.–China truce cools trade tensions and supports risk appetite, but it’s far from a turning point. Expect a cautious uptrend with pullbacks as markets weigh optimism against unresolved structural rivalry.

Trade Truce Signals Temporary Stability

The meeting between President Donald Trump and President Xi Jinping in Busan, South Korea, has temporarily eased one of the biggest sources of global market anxiety. Trump announced that tariffs on Chinese goods would be reduced from 57% to 47%. China agreed to resume large-scale U.S. soybean purchases and suspend rare-earth export curbs for one year. China will also open talks on semiconductor cooperation. Both leaders called the meeting a success, signaling an intention to stabilize relations after months of escalating trade friction.

Markets initially responded with optimism. U.S. equities and global indices rallied modestly as investors welcomed the reduction in tariff escalation risk and the restoration of trade flows in agriculture and manufacturing. The deal particularly benefits industrials, materials, semiconductors, and agribusiness, as it offers some visibility on supply chains and reduces near-term input cost uncertainty. For American farmers, the renewed Chinese demand provides relief after years of strained exports and price volatility.

Fragile Truce, Strategic Rivalry Intact

Still, this is not a full-scale trade peace. The truce remains tactical and fragile. The underlying strategic rivalry—over technology, advanced manufacturing, rare earths, and geopolitical influence—remains unresolved. Tariffs, though lower, are still roughly double their pre-trade-war levels, continuing to weigh on import costs and corporate margins. China's pause on rare-earth restrictions is temporary, and both sides retain the ability to weaponize trade leverage againif political or economic pressure builds.

In Washington, Trump faces pushback from several Republican senators. They warn that the current tariff levels still raise costs for U.S. consumers and manufacturers. In Beijing, Xi’s commitment to re-engage with the U.S. is driven partly by the need to stabilize China’s slowing economy and ease export pressures. Both sides have tactical reasons to claim victory. However, neither has made structural concessions that would permanently change the trajectory of U.S.–China competition.

Market View: Short-Term Relief, Measured Upside