Trump travels a long way for a big, fat hug from Xi

At Tricio we tend to avoid commenting on political events unless they have market and/or economic importance. US President Trump is travelling to meet China’s President XI today, where he expects a ‘big, fat hug’ from Xi. This may or may not happen. Xi quite famously did hug Russian leader Putin in 2024 and had a great catch-up with Putin and North Korean leader Kim last year (photo of Xi and friends below).

Without going over the first Trump administration’s anti-China stance, tariffs and trade restrictions, which the second Trump administration has piled up on to some extent, investors may be hoping for a ‘nothing to see here’ outcome from this meeting. Media analysts are very concerned about Trump throwing US support for Taiwan under the bus in order to get along with Xi and get some favourable headlines re buying more US goods and opening up China for US firms. Backing down on support for Taiwan would not go over well with Congress though, and the Americans who care about foreign policy and events usually see Taiwan as small island (with a democracy and a small but vocal Christian population) that produces a lot of semiconductor chips and has produced great little league baseball teams through the ages. Supporting Taiwan vs. potential aggression from communist China is a relatively low policy bar for US politicians.

But Trump does want to show US voters (and donors) back home that he has a big role in the international stage and that ‘strong leaders’ like him. So brace for a lot of ‘big’ headlines like the biggest ever pledges of investments from China, biggest ever purchases of US agricultural goods and of course pledges of support from China to try and get Iran to negotiate a peace deal and other matters. Trump is bringing along tech and banking leaders from US firms, with Nvidia’s Jensen Huang jumping on board at the last minute (it seems) to add some real weight to potential trade talks. Musk is probably seen as yesterday’s EV news and his robots can’t dance as well as China’s. His SpaceX and other dreams (putting data centre’s in space…) are probably seen as sales patter to boost his fortunes and Chinese government finance advisors probably have ‘worst case’ scenarios planned out where all of his house of cards tumble into the dust. Cook is probably seen as a mobile phone guy who got lucky off the back of previous leaders hard work. Apple does have a near 20% share of the Chinese mobile phone market though, which probably puts a target on the firms back as China would probably like to see domestic companies do better. China would like more access to Nvidia’s best chips, but is also keen on domestic chip producers not just catching up, but surpassing Nvidia. Cheaper and better chips are the future for Chinese production and AI hopes.

What will Xi be thinking? No doubt his advisors are channelling Napoleon’s words of advice – never interrupt your enemy when they are making mistakes. Trump angering US key allies in Europe with tariffs? You go girl. Trump angering key NATO allies (European plus Canada) with ‘51^st state’ comments about Canada and threatening to ‘take’ Greenland? Hooray! Wading into a potential ‘forever war’ with Iran that is jacking up global energy prices and hitting Japan, Europe and US inflation and growth prospects while making China look wise for stockpiling oil and having plenty of coal and renewable energy? Whoop whoop! No doubt China would like to sit with PM Carney and talk about the importance of a stable trade and political environment for middle countries.

Bottom line? Xi may well give Trump a big, fat hug when they meet. But this may be more along the lines of the famous ‘Mafia kiss’ given by the boss to an underling. Xi may be thinking ‘keep on churning away Trump, keep on making enemies out of your countries oldest friends, keep on ranting and raving against the perceived slights and misfortunes that you post on social media accounts in the early hours of the morning’. China under Xi may well like to see Taiwan join them before long, but they can be patient. The more erratic US foreign policy looks (and acts), the more attractive the relative stability (ignoring all the negatives of a one-party system, human rights etc.) may appear.

For markets – here is hoping that nothing of real importance happens.   

Gerry Celaya

Chief Strategist