Are US-China trade negotiations at a turning point?

US-China trade talks held in London this week culminated in an extended truce between the world’s two largest economies, but a lack of detail has left investors on edge. 

The deal, subject to final approval, would increase supplies of rare earth metals and minerals to the US, while restrictions on exports of AI chips and semiconductors to China could be relaxed.  

The two nations had come to a truce over trade tariffs, pledging in Switzerland last month to cut their respective tariffs by 115% and provide a 90-day pause to resolve the trade war, before subsequently accusing each other of breaching the agreement.

Dollar resumes slide

The US dollar sunk to a three-year low on Thursday, after President Donald Trump announced he would set new levies on trading partners in the next one or two weeks. The euro, meanwhile, hit its highest level against the dollar in almost four years as investors seek out alternative haven assets. The greenback has lost almost 10% in value against a wider ,basket of major currencies so far this year. Stocks in China and Hong Kong, which had been on track to enter a bull market earlier this week ahead of the London talks, traded lower on Thursday led by declines in the tech sector amid ongoing trade uncertainty.

“We are closer to the end than the beginning of the trade war,” says Martin Shultz, Head of International Equities at Federated Hermes. He adds that in China, consumer sentiment is rebounding, the property market may be bottoming and the government has provided further policy support. “The geopolitical issues related to US-China tensions remain, but we believe that this bull market has got long legs,” he says. “The US and China have realized that they need to take a pause. The two nations still have a strong trading relationship. At the end of the day, China requires access to US advanced semiconductors, and the US needs China’s rare earth resources. While the trade talks may not yield a major agreement in the near term, they may have created a stepping stone to achieving one.”