Why the Latest US-China Deal Leaves Investors Holding Their Breath
A collective, yet cautious, sigh of relief echoed through global markets this week as the United States and China announced their latest trade truce. The news offers a glimmer of hope that a lasting resolution can be forged, pulling the world’s two largest economies back from the brink of a full-blown tariff war. However, beneath the surface of the diplomatic handshake lies a troubling ambiguity, leaving seasoned investors to ask: Is this a genuine breakthrough or just the eye of the storm?
On the face of it, the deal carries tangible wins. President Donald Trump declared the deal “done,” highlighting China’s commitment to supply crucial rare earth minerals while the U.S. agrees to maintain access for Chinese students to its universities. China’s Vice Commerce Minister, Li Chenggang, confirmed that a framework for ongoing negotiations has been established.
Yet, the market’s reaction was far from euphoric. Wall Street edged lower, and the dollar slipped. While Chinese stocks saw a modest gain, the tepid response underscores a deep-seated skepticism. The reason is simple: a critical lack of detail.
The fine print in the Details
The core of the market’s anxiety lies in the fine print—or rather, the absence of it. “The details are scarce, and both sides are claiming that their needs were satisfied… but this issue is not close to being settled,” observed Chris Grisanti, Chief Market Strategist at MAI Capital Management.
This sentiment was echoed by Oliver Pursche, Senior Vice President at Wealthspire Advisors, who pointed to the conflicting narratives. “The other big piece of news is the U.S. and China seem to have a framework for further discussions, and that contradicts a statement of ‘it’s a done deal’,” he noted. Compounding the confusion, a White House official mentioned the possibility of a staggering 55% tariff on Chinese goods, a statement that seems to fly in the face of a de-escalation.
the trade war’s ultimate impact on inflation and employment remains a significant variable. The conflict has already contributed to an 8% slide in the dollar’s value against major currencies this year, fueled by concerns over the U.S. economy and its mounting debt.
The Road Ahead: Cautious Optimism The primary positive takeaway is that dialogue has replaced antagonism. The agreement, as U.S. Commerce Secretary Howard Lutnick put it, adds “meat on the bones” of previous understandings. It successfully pulls both sides back from the most extreme, triple-digit tariff scenarios.
However, the path forward is anything but clear. With President Trump’s July 8 deadline for a tariff pause on other trading partners fast approaching and a host of other domestic challenges on his plate, the stakes for a successful, detailed resolution with China are higher than ever.
For now, investors remain vigilant. The prevailing mood is one of cautious opportunism, not unconditional bullishness. As one portfolio manager aptly stated, any rally on a major deal “could be short-lived as new risks materialize.” In this high-stakes negotiation, the truce is welcome, but true stability remains just out of reach. The market is watching, waiting, and weighing the difference between a press release and a paradigm shift.
Economic Scars and Lingering Risks
While the S&P 500 has impressively rebounded over 20% from its April lows, many analysts warn against premature celebration. Phillip Wool, Chief Research Officer at Rayliant Global Advisors, argues that investors are “significantly underestimating the damage already caused by uncertainty this year.” The tit-for-tat tariffs have already taken a toll on business confidence, supply chains, and consumer sentiment in both nations.
For China, the reprieve is critical as it grapples with deflationary pressures and weakening domestic consumption. For the United States,
Published on 19/06/2025
By Michael S.