This weekend, world markets took a breather. Washington and Beijing are preparing to end their years-long trade war. Or at least, let's call it a brief respite. President Donald Trump and Chinese leader Xi Jinping will announce a series of agreements at a summit this week that could be called a trade peace. But let's be honest: This is just a ceasefire. The real battlegrounds remain, but the issues are being postponed a bit. Trump stood before the cameras over the weekend and said, "I feel very good about the agreement with China." Indeed, a series of agreements were reached in Malaysia recently. China is starting to buy soybeans again from US agricultural states.
The US, meanwhile, is suspending its threat of 100% tariffs. In return, Beijing is agreeing to ease restrictions on rare earth metals and magnets, not lift them. Global stock markets have been buoyed by this news. American stock markets are also currently experiencing a surge of enthusiasm. But analysts closely following the talks have a warning: Only the easy, superficial issues are being resolved. The underlying issues of conflict remain unchanged. They will resurface in the future. For a truly lasting, durable agreement to emerge, the parties must reach agreement on issues such as government subsidies, technology competition, and national security. However, it appears the US and China have diametrically opposed policies and views on these issues. While the US advocates for a free market economy, China advocates for and refuses to abandon a state-led model.
US Treasury Secretary Scott Bessent warned Beijing during recent talks. He said, "Rebalance your economy and increase domestic consumption." But China paid little attention. He backtracked and openly stated in a policy document published last week, "Our future lies in production and technological self-sufficiency. In other words, he refuses to be a consumer country. He says we will continue to produce and export. In other words, China is going its own way, not in the direction America wants. China's goal by 2030 is high technology and domestic production, and thus, completely eliminating foreign dependency and becoming a full-fledged exporter. Meanwhile, it's worth noting that Trump is well-prepared for talks with China. He toured Asia, visiting Thailand and Malaysia. He made new agreements there regarding rare materials. The same applies to Australia. He signed an anti-dumping agreement with Cambodia. The goal here is to prevent products from coming from China. In other words, Trump has been wandering around China's backyard, gathering some allies. His goal is very clear: to have a stronger seat at the bargaining table before meeting with Xi Jinping. Trump promised to go to China. He also hinted that Xi would come to Washington or Maralago. In other words, they will meet bilaterally. This is good news for the world. In 2026, China will host the Apex Summit, and the US will host the G20 leaders' summit. It's possible the two sides will meet again there.
So, new stages are set. But all the exciting developments don't offer a solution to the rare earths and chip war, the main front between the US and China—the technology wars. The US continues to expand its chip and technology export bans to restrict China's access to advanced technology. China, in turn, uses rare earths, used in everything from smartphones to missiles, as leverage. After the latest talks, Bessent said, "We will postpone new rare earth restrictions for at least a year. In other words, the issue is being postponed. Everyone is aware that this is simply a matter of buying time. Because China never wants to let go of this strategic mineral issue."
Dexter Roberts of the Atlantic Council commented, "Giving up this advantage would be naive on China's part. Still, we shouldn't lose our heads. There are fronts where the war could end. One of these is the fentanyl issue. The US is trying to prevent the import of these minerals from China." China was complaining about the spread of the deadly drug Fentanyl due to chemicals and imposed a 20% additional tax as a penalty. China is now signaling cooperation on this issue. If progress is made, this tax may be reduced. This would be a significant economic relief for China during a period of weak domestic demand. It would also help reduce product prices for the United States. Meanwhile, the implementation of the Phase 1 agreement signed during the first trade war, which erupted during Trump's first term, remains controversial.
The US is conducting an investigation against China regarding this matter. Trump says we can stop this investigation if things go well. So, there's no clear solution there either. It's just a temporary pause. Washington strategist Scott Kennedy summarizes the situation as follows. He says the parties have set the big picture aside. They're agreeing on minor issues, but no one is addressing the deep problems with China's economic system. So, looking at the current situation, the US and China are playing the same game again. There's a little detente, a little tension, a little show of force, but the real issues remain in the background. This is no longer a trade war. It's a technology and resource war. Rare metals, chips, energy chains, data networks—they will continue to compete in all of these.
These are all the invisible weapons of the new world, and the winner of this war will not only be the side that produces more but also the side that develops a smarter strategy. So, for now, let's enjoy the markets, the lush greenery. I hope the Fed will also cut interest rates this week. There's even the possibility of monetary easing. Meanwhile, the five-year financial statements of the major new technology company, Mag 7, are due. I anticipate a positive week for the market. I hope nothing major happens. The major problems between the US and China are far from over. Sooner or later, more serious debates and conflicts will erupt on this issue. But for now, the parties have said, let's compromise a bit. Both sides are tired, the public is tired, and the markets are tired.
