Trump China Visit Ends with Stability Pledge, Structural Stalemate

Former President Donald Trump's May 2026 diplomatic visit to Beijing concluded with a joint commitment to near-term financial stability but left fundamental trade conflicts unresolved. The trip, reported by investing.com on 16 May 2026, yielded a public pledge from Chinese officials to avoid competitive currency devaluation. This assurance triggered an immediate 4.2% rally in the offshore yuan (CNH) against the US dollar. The core stalemate over US tariffs and technology restrictions, however, persists without a breakthrough timeline.

Why Markets Focused on Currency Stability

Currency markets reacted most sharply to the visit's outcome. The explicit Chinese pledge against competitive devaluation directly addressed a primary concern for global investors and the US Treasury. The offshore yuan’s surge to 6.85 per dollar reflected immediate relief that a destabilizing currency war was off the table. This stability is viewed as a necessary precondition for any future trade negotiations. The People's Bank of China (PBOC) is now expected to maintain the yuan within a tighter band of 6.80-6.95 for the remainder of Q2 2026.

The $375 Billion Tariff Impasse Remains

The foundational US-China trade dispute saw no material progress. The framework of tariffs imposed during Trump's first term, covering approximately $375 billion in annual Chinese imports, remains fully in effect. Chinese demands for a full revocation of these duties were met with a US insistence on structural economic reforms. These include reducing state subsidies and granting US firms greater market access in sectors like cloud computing and finance. The lack of a working group or new negotiation calendar signals a prolonged deadlock.

How Institutional Portfolios Are Adjusting

Asset managers are interpreting the outcome as a new, fragile equilibrium. The stability pledge reduces tail risk, allowing for a tactical overweight in Chinese equities listed in Hong Kong. The Hang Seng China Enterprises Index gained 3.1% on the news. Conversely, the tariff stalemate reinforces a strategic underweight in export-oriented Chinese industrial and technology sectors vulnerable to US restrictions. Portfolio shifts are incremental, with aggregate exposure to Chinese assets rising by an estimated 15 basis points among global funds.

The Risk of a Renewed Tech Cold War

The most significant unresolved conflict lies in technology. US restrictions on advanced semiconductor exports to China were not discussed in detail, according to sources familiar with the talks. This omission is a critical limitation of the visit's achievements. China's drive for technological self-sufficiency continues unabated, with its 2026 semiconductor subsidy fund exceeding $150 billion. This parallel development ensures ongoing friction, potentially bifurcating global tech supply chains. The stalemate on tech may outweigh the benefits of currency stability for long-term investors in the sector.

What does 'no competitive devaluation' mean for the yuan?

The pledge means China commits not to deliberately weaken its currency to gain a trade advantage. In practice, the PBOC will use its daily reference rate and liquidity tools to curb excessive volatility. This allows for gradual appreciation if dollar weakness persists, but prevents a sharp, destabilizing drop. The immediate target is stabilizing the yuan basket (CFETS) around the 98-102 index range.

Did the visit change the outlook for US tariffs?

No. The visit did not alter the tariff landscape. The $375 billion in existing tariffs remain, and the US legal framework enabling new tariffs under Section 301 and Section 232 stays active. The outcome merely formalizes a temporary truce where neither side escalates with new broad-based tariff rounds, at least through the 2026 US midterm elections.

Bottom Line

The visit established a temporary stability floor under markets but failed to dismantle the architecture of US-China strategic competition.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.