US and China to Hold 2-day Summit to Frame Future Talks

The leaders of the US and China may meet in Beijing for a two-day summit on May 14-15 to establish a framework for future negotiations on trade, technology, and security, according to a JPMorgan report. The high-stakes meeting between President Donald Trump and President Xi Jinping aims to address critical friction points, including the reopening of the Strait of Hormuz and reciprocal access to semiconductors and critical minerals.

"We believe that the upcoming summit opens the door for a powerful initiative: a joint endorsement by both leaders of a Bilateral Investment Treaty," former US Ambassador to China Max Baucus and former Morgan Stanley Asia Chairman Stephen Roach wrote in The Economist.

The agenda is expected to cover a potential multi-dimensional agreement. Key issues include securing China’s assistance in reopening the Strait of Hormuz, through which 21% of global oil flows, and a major trade-off involving US semiconductor export controls and China's dominance over rare earth mineral exports. The talks could also see China agree to substantially increase purchases of US soybeans, Boeing aircraft, and crude oil to maintain the current tariff truce past a November 10 deadline.

The summit occurs as other world powers actively seek to reduce their reliance on Chinese supply chains. Failure to agree on a framework could intensify trade frictions, while a proposed Bilateral Investment Treaty could provide a structured path to de-escalation and stabilize the fraught economic relationship.

G7 Pressure on Critical Minerals

The US-China talks are set against a backdrop of coordinated efforts by other advanced economies to de-risk from Beijing. At a recent G7 meeting in Paris, ministers from seven leading economies made reducing dependence on China for critical minerals a top priority. These materials are essential for electric vehicle batteries, computer chips, and defense equipment.

France, which holds the G7 presidency, is advocating for creating groups of producing and consuming nations to establish alternative supply chains. Domestically, France aims to produce enough rare-earth oxides to cover all of European demand for heavy rare earths and around a quarter of its light rare earth needs by 2030, according to French Economy Minister Roland Lescure. This collective push adds pressure on both the US and China to find middle ground on supply chain security.

A Framework for Future Deals

Analysts believe the summit is unlikely to yield a comprehensive trade pact. Instead, the goal is a framework for further negotiations, as noted by JPMorgan. The US has reportedly requested China's help in pacifying the Strait of Hormuz, a key chokepoint for global energy, which gives Beijing a significant point of leverage.

The proposal for a Bilateral Investment Treaty (BIT), floated by Baucus and Roach, represents one possible structure for such a framework. A BIT could establish rules and protections for investors from both nations, finding middle ground on sensitive sectors and potentially easing the tit-for-tat restrictions on technology and resources that have defined the relationship in recent years. For now, a transactional agreement involving large-scale purchases of US agricultural and energy products appears to be the most immediate path to preserving the current tariff status quo.

This article is for informational purposes only and does not constitute investment advice.