Trump-Xi: Managing rivalry, signalling calm

Trump in China

President Trump’s visit to Beijing marks the first visit by a sitting US president to China in nine years, the last also being Trump’s state visit in 2017. It is arguably the most significant bilateral diplomatic event of 2026. The meeting comes at a critical juncture, against the backdrop of the Iran war and a complex agenda of priorities. Markets entered the summit with restrained expectations, focused on signs of stabilisation.

Trump invited Xi to visit the United States on 24 September, which may help to frame this week’s meeting. The Beijing summit appears less focused on final outcomes and more about setting the conditions for a more consequential summit later in the year. Our take is that the initial messaging was constructive. President Xi mentioned to President Trump that he believes the two countries have “more common interests than differences,” and adding that “success in one is an opportunity for the other.”

Talking trade

Market access and economic engagement were clear priorities, even in the absence of a formal business forum. Chinese firms involved in AI development were among the beneficiaries, as the US cleared 10 Chinese firms to purchase Nvidia’s H200 chips, including companies at the core of China’s domestic large‑language model ecosystem. While based on Nvidia’s older Hopper architecture, the H200 remains highly relevant for AI training and inference, particularly given China’s inability to access Extreme ultraviolet lithography (EUV) equipment.

Commercial announcements were largely in line with pre‑summit expectations, with no major breakthroughs or surprises. Progress was concentrated in “low‑hanging fruit,” notably Boeing aircraft, agricultural purchases such as soybeans and related goods.

China renewed import licences for hundreds of US beef plants, after authorisations were allowed to lapse last year amid escalating trade tensions. While the decision signals a degree of trade normalisation, China’s domestic meat sector continues to face oversupply, and softening demand. These goods make up a significant share of US exports to China, serving an important signalling function in normalising trade.

One area absent from official readouts but central to negotiations is critical minerals. The Busan truce on rare‑earth export controls runs through autumn, with no sign of early extension. Rare earths remain a key point of leverage for China, and securing a rollover was likely an implicit objective. US Trade Representative Jamieson Greer’s comments on a “passing grade” on export flows suggests the arrangement is holding.

Both sides agreed that the Strait of Hormuz must remain open and that Iran can never have a nuclear weapon. From China’s perspective, a cessation of hostilities would be economically beneficial. Although China has diversified its energy mix through coal usage and rapid renewable build‑out, oil imports fell sharply by 20% y/y in April, highlighting the lingering sensitivity to Middle East disruptions.¹ Still, oil imports from the Middle East only accounted for about 8.7% of China’s primary energy consumption, using 2024 figures.²

This meeting marks the seventh face‑to‑face encounter between Trump and Xi. Equity market reactions have typically been uneven in the immediate aftermath of prior meetings, with much of the optimism often priced in ahead of the event. That said, historical patterns suggest there has tended to be a positive upward drift in the weeks that followed after markets have had time to digest outcomes. Albeit, with rallies vulnerable to reversal if policy follow through disappoints.

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The path ahead

Looking back at Trump’s first term, earlier interactions were associated with more constructive equity market outcomes. More recent engagements, such as the October 2025 meeting on the sidelines of APEC helped lay the groundwork for a thaw in relations following “Liberation Day,” while the June 2019 Osaka G20⁴ meeting restarted negotiations after trade talks had previously collapsed.³ Both episodes were arguably better characterised as de‑escalation and containment exercises rather than attempts at deep integration.

Currency dynamics may offer a related signal. President Trump has repeatedly argued for a stronger RMB. Since the Iran war began, the Chinese currency has been a strong performer. While the move has been modest and is likely more a reflection of reduced expectations for near‑term The People's Bank of China (PBoC) rate cuts, it also eases external pressure for faster currency appreciation.

Xi proposed a framing of "constructive strategic stability" to guide the relationship over the next three years and beyond, suggesting growing Chinese confidence in managing the relationship on its own terms. President Xi’s reference to avoiding the “Thucydides Trap,” and Foreign Minister Wang Yi’s emphasis on multipolarity at the 2025 Munich Security Conference, underscore Beijing’s preference for managing rivalry without allowing it to become destabilising.

On a lighter but still telling note, there are tentative signs of optimism on the soft‑power front. Panda diplomacy has long served as a symbolic barometer of bilateral relations. A newly announced ten‑year agreement will see two pandas arrive from Chengdu later this year, lifting the number of pandas in the US to six.

Investment risks
 

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