President Donald Trump will be the first US leader in almost a decade to visit China when he lands in Beijing on Wednesday. His much-anticipated summit with President Xi Jinping delayed from March due to the Iran war offers the leaders of the world’s two largest economies a chance to reset personal ties and look for common ground on trade, technology and a range of other contentious topics. But the timing could not have been worse for Trump or better for Xi. While Trump is lost in how to end the Iran war, Xi is perfectly settled in his new role as the leader of the new world. While Trump is moving from one crisis to another, Xi carries on with the aura of a confident leader. While both US & Chinese economies are doing well in their own core areas, it is the political leadership arena where Trump pales in comparison to Xi. The main issue of discussion might be China's relationship with Iran and it's ability to influence Iran to accept US terms for opening up Strait of Hormuz. We believe China has significant leverage at this point of time. Not only in terms of it's excess reserves of 1.2 billion barrels but also it's ability to shift to new energy resources. In addition it can act as a guarantor for Iran because of their close commercial interests. Trade, tariffs, AI might be other areas of discussion where both Trump & Xi can find common ground. Expectations include major Chinese commitments to purchase soybeans, energy – particularly LNG – and potentially Boeing aircraft. Such deals would help stabilize the US agricultural sector ahead of the 2026 midterms while assisting China in diversifying its energy supply away from the vulnerable Strait of Hormuz. The current effective tariff rate for Chinese goods is approximately 20% including the 11% before Trump 2.0 and around 10% since Trump 2.0. On Taiwan, we believe even if Trump tries, he might not get it past either Congress or Senate. So, we do not expect Trump to commit on the Taiwan issue any more than what the previous US presidents have done. To summarise, Xi goes into the summit with a far superior hand than Trump. China is fairly well insulated from the war’s impact, with a diversified energy system based on coal and renewables and with huge petroleum stockpiles. Before a shortage of oil becomes a problem for China, high gasoline prices will be a bigger problem for Trump. Xi can afford to ignore the Iran issue while he decides what commercial favors to give to it's allies. From a market perspective, any comments from Trump/Xi on Iran conflict will be most sought after. In all likelihood, more trade deals and rare earth co-operation imply upside for both US & Chinese tech companies.
