How to Trade the China-US Talks

Dialogue between the world’s two largest economies unsurprisingly affects the global financial markets. The US and China have been at odds over technology, geopolitical posturing and trade. Their “talks,” even those about the two getting together for discussions, induce volatility across the markets, from currencies to technology and commodities. Understanding the market impact of the US-China talks allows traders to explore more opportunities and manage risk better. 

The Global Significance of China-US Relations

Both countries are economic powerhouses with significantly coupled economies. While China’s growth relies on US consumption and investment, America benefits from the massive Chinese manufacturing industry. Disruptions and tensions in either country impact their economies and the financial markets worldwide. 

The tariff tensions that persisted through the first half of 2025 impacted both economies deeply. In Q1, 2025, the US economy experienced the first contraction in nearly three years, largely because businesses accumulated inventory, anticipating tariff-led trade restrictions. Concurrently, China’s manufacturing sector experienced its largest contraction in 16 months in April 2025. The shared economic weakness encouraged the nations to consider peace talks in June.

This also brings us to the fact that the relations between the US and China affect economies dependent on them as well. For instance, after months of trade-related clashes, the talks in June 2025 positively impacted the Australian markets. When President Donald Trump announced that he had a “very good” call with his Chinese counterpart, Xi Jinping, the Australian markets registered positive gains. In the first week of June, the ASX registered a gain of 1%, albeit modest by the index’s standards. The gains were particularly driven by the mining sector. This is because Australian mining goes to Chinese manufacturing, which then fulfils the US demand.

The tariff war also hurt global growth. In the light of escalating trade tensions, the World Bank lowered the forecast for global growth to 2.3% in its June report, before the trade talks began.

Key Factors Determining the US-China Stance

The US-China relationship is complex. Many issues go beyond simple trade. Understanding these can help identify market opportunities.

Trade Tariffs and Balances

Tariffs are central to the trade conflict. Trade tariffs affect supply chains, driving consumer prices higher and resulting in inflation in the consuming nation. In this case, while the US desires fairer market access, China delays shipments as tariff frictions rise. As of June 2025, the US had agreed to cap the tariffs at 55% while Chinese tariffs on US imports would remain at 10%. The truce was reached after seaborne Chinese exports to the US declined 28.5% y-o-y in May 2025, after tariffs peaked at 143.45% in Q2 2025.

The Battle of Tech Supremacy

Gaining technology leadership is a key issue between the two nations. The tech war has several aspects, including semiconductors, AI and intellectual property. The US tries to limit China’s access to advanced chips and manufacturing tools, while China retaliates with a two-pronged approach. First, by restricting raw material supply that drives chip development, and second, by intensifying its self-sufficiency in technology. A split in the global technology supply chains could take away from the market share of US tech giants. For instance, in January 2025, the release of China’s AI model, DeepSeek, eroded close to $1 trillion from the US markets.

Geopolitical and Strategic Considerations

The US-China economic rivalry affects how global supply chains are built and how they shift. It impacts alliances and military actions. It adds complexity to world peace, economic stability and growth. While the trade war during Trump’s first tenure led to diversification of supply chains, the renewed tiff in his second term raises different concerns. Alternative trading blocs, such as the emerging South-Asian economies, are driven to secure their growth, which could reshape power dynamics at the global level.

Market Indicators for Traders to Watch

Watching certain market indicators that reflect sentiment and potential shifts is paramount to trading the US-China talks. Here’s a look.

Currency Movements (USD/CNY)

The exchange rate between the US dollar (USD) and the Chinese yuan (CNY) is a critical barometer. The strengthening of the yuan against the dollar often signals optimism for a trade resolution or improved relations. Conversely, a weakening yuan might suggest increased tensions or economic concerns in China.

Major Indices

Stock indices, particularly the S&P 500 in the US and the Hang Seng Index in Hong Kong, react strongly to news regarding the US-China talks. Positive developments drive bullish sentiment, especially in sectors sensitive to trade, such as technology and industrials. On the other hand, negative news may trigger sell-offs. Traders must keep an eye on these movements to gather insights into how the markets are collectively interpreting the ongoing dialogue.

Commodities

Prices of key commodities are highly susceptible to US-China relations. China is a massive consumer of raw materials, so any impact on its economic growth or trade policies can significantly affect demand. Rare earths, often at the centre of tech disputes, are also sensitive to the trade talks. Traders should monitor commodity price trends and supply chain disruptions to make informed decisions.

To Sum Up

• The US-China talks significantly impact global trade and the financial markets.
• Tariffs, technology and geopolitical strategy are key aspects defining the US-China relations.
• The relationship is determined by trade balances and tariffs, the battle for tech supremacy, and geopolitical and strategic developments.
• Forex, indices and commodities are susceptible to talk-related price movements. 

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