Muted hopes ahead of Trump-Xi talks as trade truce likely to be prolonged

Both sides have indicated limited expectations, making it unlikely that markets will see a meaningful trade breakthrough from this week's meeting, thereby lowering the chances of a sharp risk-on move specifically related to US-China relations. The anticipated extension of the Busan trade truce, which is set to lapse in November, removes a near-term tail risk of a return to triple-digit tariffs and disrupted rare earths access, factors that significantly affected bilateral trade last year. Any advancement on the Board of Trade's proposed tariff exemptions for up to $30 billion in Chinese exports—covering US agricultural, energy, and medical products, as well as Chinese consumer and low-tech goods—would be incremental rather than transformative, yet could provide modest relief to affected industries. Currency and equity markets linked to critical minerals and advanced robotics may monitor for signs of tension over FCC import restrictions or US access to critical minerals, though analysts do not expect these topics to disrupt the broader truce this week.

--- Both sides are maintaining low expectations, so the Trump-Xi meeting itself, not any individual deal, may be the key story this week.

Summary:

• The US and China have tempered expectations before Xi Jinping's Washington visit this week for his meeting with President Trump, with analysts indicating the visit itself could be the main result.
• Both nations are likely to extend last year's Busan trade truce, which expires in November, but other outcomes are expected to be limited.
• US Trade Representative Jamieson Greer stated that the two countries are not pursuing a "comprehensive" deal but rather aim to "manage" the relationship, possibly via announcements on agricultural trade and nontariff barriers.
• The "Board of Trade," introduced during Trump's earlier Beijing trip, may see tariff exemptions on up to $30 billion of Chinese exports, covering US agriculture, energy, and medical products as well as Chinese consumer and low-tech goods.
• Treasury Secretary Scott Bessent said the two sides have agreed to maintain an AI dialogue, including a proposed US warning system for sharing AI-related national security threats, though analysts are skeptical of a broader deal this week.
• Beijing is anticipated to oppose FCC import restrictions aimed at advanced robotics, while the US remains unhappy about ongoing difficulties accessing critical minerals, but neither issue is expected to derail the truce this week.

US officials have worked to lower expectations before President Trump's meeting this week with Chinese President Xi Jinping—Xi's first US visit in over a decade—with analysts suggesting the meeting itself, rather than a major deliverable, may be the purpose, according to Politico. Both countries are anticipated to extend a trade truce agreed upon last year in Busan, South Korea, which is due to expire in November, but other trade results are likely to be more limited.

Earlier this month, US Trade Representative Jamieson Greer stated that the two sides are not seeking a comprehensive deal but rather aim to manage the bilateral relationship, potentially via announcements on agricultural trade and nontariff barriers. Leland Miller, CEO of China Beige Book, described expectations for the meeting as fairly low but deemed that positive because preserving stability in the relationship is the primary objective. Edgard Kagan of the Center for Strategic and International Studies noted that a regular cadence of leader-level meetings itself indicates progress, given that bilateral trade saw triple-digit tariffs at points last year, along with a drop in US agricultural sales to China and Beijing's restriction of rare earth exports vital to US industry.

In areas where limited progress might occur, the US-China Board of Trade—announced during Trump's earlier Beijing visit—is viewed as a potential mechanism for tariff exemptions covering up to $30 billion of Chinese exports in nonsensitive categories, possibly including US agricultural, energy, and medical exports as well as Chinese consumer and low-tech goods. On artificial intelligence, Bessent said the two sides have agreed to continue a dialogue, including a US proposal for a warning system to share AI-related national security threats. However, Miller noted that there is not yet agreement even within the US administration on what such cooperation should entail, let alone a broader deal. Some US lawmakers, including Representative Ro Khanna, have called for AI safeguards to be prioritized at the meeting, including a ban on self-improving AI systems.

Friction points persist on both sides. Beijing is expected to push back against recent Federal Communications Commission import restrictions aimed at advanced robotics, while US officials remain dissatisfied with continued challenges in accessing critical minerals, a topic likely to arise in discussions. Miller said the US will probably eventually lose patience over critical minerals access, though not this week. A separate proposed Board of Investment, also announced during Trump's Beijing visit, has received less attention. However, Mary Lovely of the Peterson Institute stated she will watch for any sign the US is warming to Chinese automaker investment in domestic manufacturing—a prospect she described as controversial and one that almost no one currently expects to materialize. Preparations for the visit continued into the weekend, with Greer, Bessent, and Chinese Vice Premier He Lifeng meeting in New York on Sunday, along with a personnel change in Beijing that elevated negotiator Li Chenggang to international trade representative.