Trump-Xi Beijing Summit This Week; Trade War Risks Loom

The Trump-Xi summit is now locked in for May 13-15 in Beijing, marking the first U.S. presidential visit to China in nearly a decade. The timing is fraught; the summit was delayed by the Iran war, and Trump's rejection of Iran's ceasefire proposal on May 10 has injected fresh uncertainty into global markets. Analysts expect Trump to press Xi on Iran policy, asking China to use its leverage with Tehran to reopen the Strait of Hormuz. Washington has also sought Beijing's help, though China's appetite to act as a pressure mechanism remains unclear. Beyond Iran, trade and technology will dominate the agenda: chip export controls, tariffs (Trump's 10% global tariff was just declared unlawful by a federal trade court), and the ongoing competition for AI dominance.

Goldman Sachs has signaled that the Chinese yuan is 20% undervalued against the U.S. dollar and expects further strengthening over the coming year. China fixed its currency at a three-year high ahead of the summit, a move that could be read as both a conciliatory gesture and a signal of economic confidence. The timing suggests Beijing is positioning for negotiation; a strong yuan makes Chinese exports more expensive but signals commitment to stability. South Korea's Kospi index saw JPMorgan raise targets to 10,000 on the memory boom, but the rally is partly contingent on U.S.-China trade tensions not escalating further.

If the summit yields a trade deal or softens chip export restrictions, tech stocks and semiconductor exporters could rally hard. Conversely, if Trump doubles down on tariffs or sanctions, supply chains could face fresh disruption. The geopolitical risk is that any escalation in Iran (Netanyahu's forces striking Iranian mainland, for example) could shorten Xi's negotiating window and force China to take a harder public stance.

Markets have priced in a constructive outcome (hence the broad-based rally in risk assets), but there is little margin for error. A failed summit or hostile tone from either side could trigger a sharp pullback in equities and a flight to safety in yields and the dollar.