Chief Market Strategist for the Americas
This week, President Trump and Chinese President Xi Jinping are meeting in Beijing. Top of mind for investors are discussions around geopolitics, AI, export controls and tariffs. Crucially, investors are hoping for an extension of the “tariff truce” which has been in place over the past year – and the incentives seem to be in place on both sides for that to occur. However, investors should not expect “tariff peace”, as tariff and non-tariff barriers between both countries remain structurally elevated due to persistent national security concerns and technological and economic competition. An extension of the “tariff truce” is important on its own, as it does not reintroduce another headwind to the economy and markets. However, zooming out, the overarching U.S.-China “trade war” is now on its ninth year – and companies will likely continue to reorganize global supply chains under the assumption that it continues for many more.
What should investors expect this week from the U.S.-China Summit?
- Geopolitics: Privately, the U.S. Administration is likely to push for China’s help in ending the Iran War – while China may ask for changes in the U.S. relationship with Taiwan. Expectations for a large shift in strategy or a joint statement are low.
- AI: The intense U.S.-China competition over who dominates AI will continue, with the U.S. focused on creating superhumans (“artificial general intelligence”) and China focused on using AI in the physical world (“intelligent robots”). Cooperation to get there is likely to remain very low – although recently expectations have increased for some collaboration on AI safety.
- Export controls: Both sides have raised trade barriers for key military and economic inputs that each controls: the U.S. with cutting edge technology (advanced semiconductors) and China with rare earths and critical minerals. These walls are likely to stay high, pushing both countries to focus on boosting self-sufficiency in these areas.
- Tariffs: Current effective tariffs on Chinese goods remain elevated at 22%. The glass half full view is that they are half of the level they reached back in mid-2025. Cumulative tariff increases by the U.S. on Chinese goods imports peaked in April 2025 at 125% and the effective tariff rate1 peaked the following month at 46%2. To prevent it from moving higher again, China is likely to announce purchases of non-sensitive U.S. goods, especially the “3 Bs” (soybeans, beef and Boeing airplanes). The glass half empty view is that current tariffs are still double as high as they were before this latest period of tariff tension – and are unlikely to come down much further as the U.S. continues separate trade investigations on China (and other trade partners).
The fact that the U.S. and China are meeting in person is already a positive development. Neither side has the incentive to raise the trade heat in the near term, as the U.S. midterms are approaching and gasoline prices are already elevated, while Chinese policymakers deal with still subdued domestic activity. However, companies are likely to continue to “nearshore” and “friendshore” supply chains as the underlying tension between both countries persists. This creates opportunities for countries that can position themselves as new manufacturing hubs (like Southeast Asia and Latin America), but also creates headwinds for corporate margins and maintains inflation uncertainty elevated. Investors should continue to focus on diversifying their diversifiers for periods of higher inflation.
1 The effective tariff rate is the tariff collected in practice at the border, calculated as the duties collected on goods imports from China divided by the value of total goods imported for consumption from China.
2 A further step down occurred in November after the last meeting between President Trump and President Xi and in March after the Supreme Court struck down the use of IEEPA2 to impose certain tariffs.
By Gabriela Santos - May 13, 2026