Why the Trump-Xi meeting matters for markets

U.S. President Donald Trump and China's Xi Jinping are meeting next week, and investors might want to pay attention.

For one, there's simmering trade and tariff tensions and, as Capital Economics' China economist Nguyen Hoang Nam pointed out in a note, the trade truce between the two runs out in November. While neither side seems to want a re-escalation, they also can't agree on how long to extend it for, the note said.

China is also likely to push for, but unlikely to get, some more tariff relief, it added. And while the Board of Trade seems close to finalising reciprocal tariff cuts on around $30bn of non-sensitive goods from each side, there's still the case of Washington's investigation into China’s “structural excess capacity,” which would see tariffs jump again, the economist explained.

Rare earths are another highly contentious topic that the two countries aren't seeing eye to eye on, Capital Economics said. In the past, escalations around rare earths have caused sharp reactions in sectors like mining and autos.

There's also geopolitical issues like the Iran war and plenty of AI-related competition bubbling away between the U.S. and China - so really there's no shortage of opportunities for market-moving tensions to arise.