Trump set for Beijing summit amid tariff rollback legal setback

President Trump is heading to Beijing this week for a high-stakes summit with Xi Jinping, marking the first in-person meeting between the two leaders in months amid heightened geopolitical tension over the Iran war. The timing is delicate: Trump's rejection of Iran's peace proposal has raised oil prices and rattled equities, and Beijing's appetite to act as a pressure mechanism on Tehran remains unclear. The summit agenda is expected to touch on trade frameworks, tariff policy, and China's role in managing the Middle East conflict, but expectations for breakthrough deals remain tempered.

The legal and political backdrop is complicated: a federal trade court has declared Trump's 10% global tariffs unlawful just days before the summit, a fresh blow to the administration's economic agenda following previous Supreme Court rulings against tariff authority. European carmakers have taken an 8 billion euro hit from threatened 25% tariffs, and Germany is preparing a fresh push to buy Tomahawks and other defense systems after Chancellor Merz fell out with Trump over trade disputes. This suggests trade policy remains a point of friction rather than resolution even as diplomatic channels reopen.

Goldman Sachs recently raised its yuan forecast, noting the currency is more than 20% undervalued against the dollar and expects continued strengthening over the coming year. This view suggests Goldman believes either Trump will ease pressure on China or that structural weakness in the US dollar will reassert itself. China's first-quarter marriage registrations hit the lowest level on record, signaling demographic and consumer confidence pressures that could make Beijing eager to stabilize external conditions. Meanwhile, a former Citadel Securities quant has tripled assets at his China hedge fund in recent months, suggesting some smart money is positioning for potential upside if the summit produces dovish signals on trade.

The core debate: will Trump use the summit as an opportunity to reset trade relationships and ease tariffs, or will he double down on tough-on-China messaging ahead of US midterms? A constructive summit could surprise markets to the upside and ease energy market tail risk. A contentious meeting could trigger fresh tariff escalation and cement a persistent China-US bifurcation in markets.