This week, the United States and China held trade negotiations in London, United Kingdom. Statements released by both the US and China on Tuesday evening indicated that they had reached a preliminary agreement framework, but no substantive outcomes. The stock markets in the US and China reacted neutrally on Wednesday. Market participants remain skeptical and pessimistic about the future of the US-China trade agreement.
Analysis suggests that the negotiations aim to control damage rather than strategic realignment. The competitive landscape between the US and China remains unchanged, with no possibility of expanding cooperation. It is viewed as a tactical de-escalation and resolution on the surface, while the strategic disengagement trend persists.
After the conclusion of the trade talks on Tuesday, China’s chief negotiator and Vice Minister of Commerce, Li Chenggang, stated in London that a framework agreement had been reached with the US team in principle. Both sides will report the details of the negotiations to their respective national leaders upon returning home.
US Commerce Secretary Howard Lutnick stated, “We have reached a framework agreement to implement the Geneva Consensus and the contents of the conversations between the leaders of the two countries.” The issues of rare earth minerals and magnets are expected to be resolved within the framework.
On Wednesday, former President Trump posted on his social media platform, Truth Social, stating that a preliminary agreement had been reached between the US and China, pending final approval from him and Chinese Communist Party leader Xi Jinping. The post hinted that China may need to resume rare earth exports for the US to agree to relax export controls on critical technologies.
Following the release of statements by the US and China, market reactions were subdued. US stocks showed mixed movements on Wednesday. The Dow Jones rose 92.85 points, an increase of 0.22%; the Nasdaq fell 17.94 points, a decrease of 0.09%; and the S&P 500 index dropped 2.26 points, a decrease of 0.04%.
Similarly, Chinese stocks fluctuated on Wednesday. By the closing bell, the Shanghai Composite Index rose by 0.52%; the Shenzhen Composite Index rose by 0.71%; the ChiNext Index rose by 0.87%; the STAR 50 Index fell by 0.2%, while the CSI 50 Index remained almost flat. Total turnover was 1.2867 trillion yuan, slightly down from 1.4514 trillion yuan on Tuesday.
Hong Kong media outlet “Hong Kong 01” expressed concerns on Wednesday that the negotiation results may not meet expectations. While the previous Geneva talks achieved tangible negotiation outcomes and consensus, the London meeting was anticipated to yield some concrete and substantive results; however, the focus appeared to be more on the framework without substantial outcomes.
According to Reuters, Sam Stovall, Chief Investment Strategist at CFRA Research in Pennsylvania, noted that the market’s reaction was lackluster, even indifferent. He remarked, “The market’s relatively subdued reaction to the ‘agreement’ with China indicates a sense of indifference. The London talks established a framework for future negotiations but did not actually address any major issues. Without a comprehensive solution, the situation is likely to worsen.”
Some individuals expressed cautiously optimistic views on the agreement. Mark Dong, Co-founder of a Hong Kong minority ethnic asset management company, mentioned, “This is good news for the market. At least now both sides have a bottom line they are unwilling to cross.”
John Praveen, Managing Director of Princeton PALEO LEON in New Jersey, commented, “Both sides have achieved something they wanted. Tensions are easing, and that’s the key. This could be a comfort to the market.”
However, Carol Kong, Sydney-based Monetary Policy Strategist at the Commonwealth Bank of Australia, believed that the future…