US-China Trade Deal: Beijing, Washington Signal Trade Harmony, Yet Uncertainty Persists

Markets Jitter as US-China Trade Talks Yield Thin Gains

The US and China concluded two days of trade negotiations on Tuesday, June 10, initially boosting demand for Hong Kong and Mainland China-listed stocks. Notably, the CSI 300 and the Shanghai Composite Index closed the Wednesday, June 11, session up 0.75% and 0.52%, respectively. However, scant details of the trade agreement capped the upside.

Overnight, US President Trump elaborated on the outcome, reaffirming the 90-day truce and stating:

“Our deal with China is done, subject to final approval with President Xi and me. Full magnets, and any necessary rare earths will be supplied, up front, by China. Likewise, we will provide to China what was agreed to, including Chinese students using our colleges and universities (which has always been good with me!). We are getting a total of 55% tariffs, China is getting 10%. Relationship is excellent!”

However, Trump stayed silent on easing restrictions on tech exports to China, particularly chips, a potential roadblock to reaching a broader agreement.

President Trump later added:

“Adding to the China readout, President Xi and I are going to work closely together to open China to American trade. This would be a great WIN for both countries!!!”

The US administration praised the deal. Treasury Secretary Scott Bessent reportedly commented:

“If China will uphold its end of initial Geneva Trade Agreement, a beautiful rebalancing of US and Chinese economies is possible.”

Beijing echoed Washington’s calls to uphold the agreement. Vice Premier He Lefeng reportedly said that both countries should honor trade commitments and maintain dialogue to ensure progress toward long-term stability.

Economists Question the Deal’s Credibility

Global markets initially welcomed the diplomatic tone and the prospect of continued discussions between the two leaders. However, economists’ reactions to Trump’s remarks were less optimistic.

Peter Schiff, Chief Economist and Global Strategist at Euro Pacific Asset Management, remarked:

“With regard to his deal with China, Trump is boasting that ‘we are getting a total of 55 per cent tariffs, China is getting 10 per cent.’ But ‘we are getting’ really means ‘we are paying.’ This tax hike means Chinese goods will be 55% more expensive for Americans who buy them.”

More expensive goods from China and cheaper goods from the US may tilt the supply-demand balance in favor of US goods. However, the reality is that tariffs on Chinese goods could drive US inflation higher, impacting Fed rate cut bets and potentially the US economy.

Brian Tycangco, editor at Stansberry Research, highlighted the one-sided nature of the agreement, stating:

“Little coming out of the US side makes sense. China agreeing to 55% tariffs and giving into US rare earth demands without really getting much. They (China) had the upper hand going into the trade talks. These terms don’t make sense. Now Lutnick is saying there are no texts to the deal, that negotiations will be a long process, and Bessent with his statement that China won’t be allowed to export its way back to prosperity. I mean, can we at least get through 24 hours first before self-destructing here?”

Tycangco also noted Beijing’s muted response, suggesting the agreement remains preliminary and that longer negotiations are likely.

Trade Deal Euphoria Fades as Markets Dip

On Thursday, June 12, Hong Kong and Mainland China markets failed to extend gains from the previous day. The CSI 300 and the Shanghai Composite fell 0.37% and 0.21% in early trading, while the Hang Seng Index dropped 0.65%.

Despite the agreement from two days of talks, the lack of substance left investors in limbo. US-China trade talks appear set to continue fueling market sentiment.

Outlook

Although the two nations reaffirmed commitments under the Geneva agreement, markets remain sensitive to trade headlines. An escalation in the trade war, through accusations of agreement breaches or stalled talks, could trigger broad-based losses. Rare earth and tech stocks remain heavily exposed to trade developments, while global market trends hinge on broader trade agreements with key economies.

On the other hand, smooth progress toward a meaningful agreement may provide a much-needed catalyst for a bull run in Mainland China equities.

Follow our coverage as US-China tech tensions reshape global markets and consult our economic calendar.