Markets woke up Monday to renewed optimism over a potential US-China trade truce, but analysts at Macquarie Bank are pouring cold water on the idea that a comprehensive agreement is anywhere close.
The latest spark came from a framework agreement reached on the sidelines of the ASEAN Summit, which will be reviewed later this week when President Trump and President Xi Jinping meet in South Korea. The deal suspends planned new U.S. tariffs and gives Beijing another year to tighten export restrictions on rare earth minerals—critical inputs for electronics and defense technology.
U.S. officials, including Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer, described the agreement as "constructive." Beijing, however, was more cautious, calling it only a "preliminary consensus."
Macquarie: Don't Call It a Breakthrough
In its latest report, Macquarie warned that while high-level talks may delay escalation, they are unlikely to resolve the strategic rifts between Washington and Beijing.
"We remain skeptical that a comprehensive agreement—one that permanently addresses all strategic issues, including trade, technology transfer, and Taiwan—can be reached in the near term," the bank wrote.
Macquarie pointed to history as a guide. Similar "preliminary agreements" have collapsed before, most notably the 2019 Phase One trade deal, which unraveled amid disputes over enforcement and compliance.
What's on the Table
For now, the U.S. is pressing China to:
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Expand soybean purchases
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Ease certain export controls
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Cooperate on rare earth supply chains
But the two sides remain at odds over thornier issues, including TikTok’s U.S. operations, fentanyl controls, and—most sensitive of all—Taiwan.
Wall Street Cheers, But Risks Remain
The S&P 500 hit a fresh high on the news, with investors betting that even a temporary pause in trade tensions could support equities. But Macquarie cautioned that this optimism is already priced into stock valuations.
With 30% tariffs on Chinese goods still in place, the bank argued that a "grand deal" remains a distant prospect. "We expect the enthusiasm to gradually subside," Macquarie said, advising investors not to expect lasting progress without tangible concessions from both sides.
The Bigger Picture
The stakes are high. The so-called "Big Seven" tech stocks have powered much of the S&P’s gains this year, and any disruption to global supply chains could ripple through markets. Meanwhile, rare earths remain a strategic flashpoint, with both Washington and Beijing aware of their importance to everything from smartphones to missile systems.
For now, the market is celebrating a truce. But as Macquarie reminds us, a truce is not a treaty—and the road to a true U.S.-China trade deal is still long and bumpy.