Markets on Edge: Will the US-China Truce Extension Spark the Next Global Rally?

by | Jul 28, 2025 | Market News | 0 comments

Introduction

As trade tensions between the U.S. and China take center stage once again, investors are asking one burning question: will a renewed truce unlock a new wave of global growth — or is volatility just beginning? With high-stakes talks now unfolding in Sweden, and whispers of a 90-day extension gaining traction, the coming days could reshape international markets. Here’s what every savvy investor needs to know.

One of the Best Broker in Europe

Leading European brokers are advising clients to prepare for high-impact moves in commodities, tech, and Asian equities. With potential tariff freezes on AI chip exports and renewed trade flows between giants, positioning early in anticipation of a deal could offer significant short-term upside.

Financial Performance

Despite lingering tensions, U.S. and Chinese indices have remained resilient. The S&P 500 closed last week above 5,500 while the Shanghai Composite held firm, backed by speculation that talks could extend the current tariff ceasefire. These moves signal investor optimism — but the real gains could come with confirmation of a truce.

Key Highlights

  • Trump and Xi may meet later this year — a bullish sign.
  • AI chip export restrictions temporarily lifted to help negotiations.
  • US-China tariffs truce set to expire August 12, with extension likely.
  • US also signed major trade deals with Japan, the EU, Vietnam, and the UK.

Profitability and Valuation

Global exporters, chipmakers, and Asian logistics companies stand to benefit. If tariffs are eased or frozen again, forward earnings estimates could rise sharply — especially for undervalued tech firms hit hard in 2024. Price-to-earnings (P/E) ratios across the board would likely re-rate higher.

Debt and Leverage

Sovereign debt pressures in both the U.S. and China make continued trade cooperation financially advantageous. Avoiding a tariff war preserves consumer spending, manufacturing margins, and public sector revenues — a win-win at a time when both economies are fighting inflationary aftershocks.

Growth Prospects

A three-month truce extension could trigger renewed demand in global trade flows, supply chain reintegration, and technology collaboration. The key sectors to watch:

  • Semiconductors
  • Shipping and freight
  • Rare earths and clean energy
  • Robotics and AI infrastructure

Technical Analysis

Indices are poised for breakout:

  • NASDAQ is approaching a critical resistance at 18,700.
  • Hang Seng Index has formed a bullish cup-and-handle pattern.
  • Shanghai Composite testing 3,200 with RSI crossing above 60.

Short-term momentum suggests a rally continuation — if macro news confirms.

Potential Catalysts

  • Confirmation of the US-China truce extension
  • Trump-Xi bilateral summit announcement
  • Reopening of select technology exports
  • Positive revisions to global GDP forecasts
  • Fed’s dovish pivot + stimulus signals from Beijing

Leadership and Strategic Direction

Trump’s latest trade strategy marks a shift: less confrontation, more deal-making. With recent EU and Japan deals signed, attention is now squarely on China. His push for a “massive” trade agreement reinforces his pivot to growth-led diplomacy as U.S. elections draw near.

Impact of Macroeconomic Factors

Global inflation easing and synchronized interest rate cuts would amplify the market reaction to a trade truce. China’s manufacturing PMI is recovering, and U.S. consumer sentiment has bounced. A stable trade framework could accelerate risk-on behavior across emerging markets.

Total Addressable Market (TAM)

The total impact of a renewed U.S.-China trade channel spans a TAM of over $2.5 trillion in bilateral trade. Layered with partnerships in AI, green tech, and logistics, the ripple effects could stretch across supply chains in Southeast Asia, Africa, and Latin America.

Market Sentiment and Engagement

Retail sentiment is rising. Options volume on Chinese tech ETFs like KWEB has surged 60% over the past week, and social sentiment around trade-related equities is hitting 3-month highs. Institutional players are quietly rotating capital into Asian equities and U.S. multinationals with China exposure.

Conclusions, Target Price Objectives, and Stop Losses

Short-Term (3 months)

  • KWEB ETF Target: $35
  • TSMC Target: $170
  • Stop Loss: 15% below breakout levels

Mid-Term (6 months)

  • Alibaba Target: $110
  • Nvidia Target (China exposure hedge): $145
  • Stop Loss: 12% trailing

Long-Term (1–2 years)

Stop Loss: Dynamic, adjusted quarterly

MSCI Emerging Markets ETF (EEM): $52–$58

Logistics ETF (XTN): $110

Discover More

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This analysis serves as information only and should not be interpreted as investment advice. Conduct your own research or consult with a financial advisor before making investment decisions.

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