Trump and China: What's Happening in the Trade Agreement?

President Trump and his team have recently revitalized the markets with details they provided regarding the trade agreement with China. They will meet with Chinese President Xi Jinping on Thursday at a critical summit in South Korea to finalize the terms of the agreement.

One question regarding the talks is about what demands the Chinese side will make, although they acknowledged some progress has been made; very little detail has been provided on this. Both sides have signaled that the agreement will be shaped around China's rare earth export controls. Treasury Secretary Scott Bessent indicated that China might postpone this issue for a year. Additionally, there are expectations for 'significant' purchase commitments from the U.S. for soybeans.

These conditions offer important concessions for China; however, there is no public clarity on what will be demanded. Ted Murphy mentioned in a weekly assessment, “We expect the Chinese side to negotiate hard,” said.

The White House also announced that the removal of hundreds of existing tariffs and the conclusion of the TikTok agreement could also be included in the negotiations. The Trump team hinted at possibilities regarding tariff reductions by requesting China to implement stricter enforcement on fentanyl exports.

It is still unclear what the Chinese side’s requests will be. However, issues like semiconductors might come to the forefront as the talks commence. China has long sought concessions regarding the U.S. export controls on semiconductors and other materials. Ed Mills, a policy analyst at Raymond James, indicated that investors should pay attention to this area.

A consultant close to the Chinese government stated in an interview with Bloomberg that export controls might be on the table for trade discussions. However, Trump's side stated that semiconductor concessions are not on the agenda. Still, semiconductors remain on Trump's mind during his Asia tour.

A planned meeting with Nvidia CEO Jensen Huang is also drawing attention ahead of Trump's summit with Xi. Huang praised Trump and emphasized the importance of cooperation with China on issues such as artificial intelligence.

As the discussions progress, Chinese media reflected that some progress has been made but conveyed it in a more modest tone alongside Trump's impressive expression style. Lastly, Trump told business leaders in Tokyo that the meeting with Xi would go very well.

Additionally, surface-level analyses suggest that there is a consensus that the U.S. may be open to reversing current tariffs in response to China's enforcement actions regarding fentanyl trade. Bessent stated that China would be willing to help in this regard. Currently, the U.S. imposes a 54% tariff on China.

Ultimately, issues like semiconductors have caught Trump's attention. Relevant parties seem hopeful for positive developments in the future.