Stock Markets Primed for US-China Deal but Risks Abound

The threat of a trade war continues to hang over markets.

Markets appear to be betting on a peaceful outcome.

Will the US and China reach a “fantastic deal,” or will tariffs rise to 157%? Previous history suggests an agreement is likely—but investors shouldn’t bet on lasting peace, Adam Clark reported for Barron’s Daily.

President Donald Trump has been alternating between threats and optimism this week ahead of a potential meeting with China’s leader Xi Jinping just before the Nov. 1 deadline for punitive tariffs.

After listing U.S. demands over soybeans, fentanyl, and rare-earth materials on Sunday, Trump struck a more conciliatory tone Monday, forecasting a deal that would be “fantastic for the entire world.”

Markets appear to be betting on a peaceful outcome.

Apple stock, for example, hit a new record Monday on strong sales of its new iPhone range in the US and China.

Despite efforts to diversify its supply chain, Apple remains heavily reliant on Chinese manufacturing, with about 80% of all iPhones assembled there.

The most likely outcome, analysts say, is an extension of the current trade truce. But that doesn’t mean relations will return to normal. Both countries remain intent on reducing the other’s leverage.

For the US, that means continued support for domestic rare-earth production by companies such as Cleveland-Cliffs.

China, meanwhile, is determined to build up its own semiconductor industry—a move that could hurt U.S. chipmakers.

Micron Technology has already given up on selling server processors to Chinese data centers after being targeted by Beijing’s bans, a development that could spell trouble for Nvidia, whose CEO Jensen Huang said the company’s market share in China has fallen from 95% to zero.