China response awaited after Trump lauds “done deal” | Forexlive

The “deal” is mainly just an exchange of easing of export controls. China will be easing that for rare earths and magnets but reports are suggesting it will only be temporary. Meanwhile, the US is supposedly to do the same on key technology but Bessent clarified yesterday that restrictions will still apply for AI chip exports. So, there’s no quid pro quo per se.

And on the tariffs front, the US will maintain 55% tariffs on China. The breakdown for that is 10% reciprocal tariffs, 20% tariffs on fentanyl, and 25% tariffs that were already in place before Trump took office. Meanwhile, Trump said that China will only slap the US back with 10% tariffs in return.

The US has tried to play it like they are the ones who came out on top with this, even if ever so subtly by Trump’s standards. The question is, will China agree to play nice for now or will they stamp their foot down right at the onset here?

As much as Trump would want markets to believe that the US is getting a win on rare earth exports, this is merely just kicking the can down the road. China still dominates the market in that regard and if there are any issues again moving forward, this is one spot that China can easily circle back to in retaliating against the US.

Not only that, do we really think China will offer up such a concession without much equivalent exchange? Just think back to the soybeans fiasco during the Phase One trade deal in 2019. When Beijing feels that it is forced into something, it doesn’t mind putting on a show. But when it actually comes to walking the talk, it will continue to safeguard its interests first and foremost.

And I would expect Xi to plan out the same kind of strategy this time around. Amid risking a never-ending escalation of tariffs, this at least is avoiding the worst-case scenario for both sides.

However, to say that it is a “deal” that makes big strides in achieving progress is definitely a leap. So, don’t expect China to paint it out that way when they do come out to respond later today.

In any case, this so-called “deal” or framework of one also still needs approval by Xi. So, let’s see if he will offer up his hand as Trump looks to want to shake it in acting for the cameras.