We do not expect the Trump-Xi meeting on May 14-15 to lead to major breakthroughs in US-China relations. We expect the near-term financial market impact to remain limited.
Trump has neither the incentives nor the means to increase pressure on China with the focus remaining on the war in Iran and a previous court ruling that continues to restrict his tariff weapon. For China, keeping relations on a stable path is a key priority, especially when it comes to Taiwan.
It is possible that the two countries could agree to increased Chinese purchases of US agricultural goods, an extended tariff truce, and the establishment of “councils” for mutual trade and investment, although these should be viewed as largely symbolic. A change in the formulation of US policy toward dealing with Taiwan would constitute a major victory for China.
