Trump Set to Meet Xi in Beijing Amid Tariff Court Ruling, Trade Deal Risk

Trump announced his plans to meet Xi Jinping in Beijing for what signals to be a critical negotiation on trade and geopolitical alignment. The timing is significant: it comes just days after a federal trade court declared Trump's 10% global tariffs unlawful in response to a lawsuit by a spice company, delivering a fresh blow to the administration's tariff agenda. However, the court ruling may prove moot if Trump and Xi reach a bilateral accommodation that sidesteps the global tariff framework in favor of sector or country-specific measures.

Investor focus is splitting between two outcomes: either Trump and Xi negotiate a reset on tariffs and IP theft concerns, which would lift equities and weaken the dollar as risk appetite returns; or tensions escalate further, triggering retaliatory tariffs and capital flight to safe havens. European carmakers have already taken an 8 billion euro hit from Trump's tariffs, and analysts expect levies could rise to 25% if the EU does not fully implement last year's trade deal. Germany's defense minister is planning a Washington trip to resolve tensions with Trump after Chancellor Merz fell out with the president.

The market narrative around the summit is heavily influenced by the simultaneous Iran war negotiations and Hormuz closure. Some observers suggest Trump may use Beijing as a venue to signal China that if the US and Iran reach a truce, China's supply chains will stabilize and Beijing's role in facilitating peace could be rewarded with trade concessions. Conversely, if the Iran war drags on, Trump may use the Beijing summit to pivot geopolitical alignment away from the Middle East toward Asia-Pacific, which could pressure oil but elevate Taiwan risk.

Sentiment is fragile. Equity futures slipped on Sunday as Trump rejected the Iran deal, and traders are now waiting for more color on Beijing intentions. The FT reported that Xi is still formally committed to the summit despite tensions, but the devil is in the details of what gets discussed and whether any framework agreement emerges. If Trump uses Beijing to signal tariff relief, cyclical stocks and Chinese equities could rally sharply. If he uses it to escalate China-specific measures, DXYThe US Dollar Index — trade-weighted USD against EUR, JPY, GBP, CAD, SEK, CHF. (dollar index) could spike and EM FX under pressure.