U.S.-China Trade Policy Risks: Sector-Specific Stock and Commodity Positioning in 2025

Semiconductor Sector: A Delicate Balance of Control and Commercial Viability

The U.S.-China semiconductor trade war has entered a new phase in 2025, marked by selective easing of export restrictions and escalating strategic competition. According to a World Economic Forum report, the U.S. has allowed increased sales of AI chips to China under a licensing agreement requiring U.S. firms to cede 15% of Chinese revenue to the government. While this policy shift aims to balance national security with commercial interests, it has introduced uncertainty for semiconductor stocks. For instance, the New York Fed reported a 2.5% decline in the market capitalization of affected U.S. semiconductor firms following initial export control announcements in October 2022, with reduced revenue and R&D investments persisting, according to a CSIS analysis.

Meanwhile, China's $47.5 billion investment fund for domestic semiconductor development, launched in May 2024, underscores its push for self-reliance, as noted in the CSIS analysis. This has raised concerns about U.S. firms' long-term competitiveness, particularly as China expands mature-node production. Investors should monitor companies like Intel and AMD, which face dual pressures from export controls and China's parallel supply chain development, as highlighted in Breaking the Circuit.

Agriculture: Tariffs and Tailwinds in a Shifting Trade Landscape

The agricultural sector has borne the brunt of retaliatory tariffs, with U.S. soybean exports to China collapsing. A report by Market Minute highlights that China's 34% tariff on U.S. soybeans has reduced exports to nearly zero, causing soybean futures to drop by 5% between July and August 2025, according to the World Economic Forum report. This has led to a 55% decline in U.S. agricultural exports to China in April 2025 alone, eroding market share from 28% historically to 12% by 2024, as also noted in the World Economic Forum report.

Agribusinesses like Archer-Daniels-Midland (ADM) and Bunge Limited have reported earnings declines due to trade disruptions, while input costs have risen 12–18% for machinery and 30–34% for fertilizers, per a Cognitive Market Research analysis (https://www.cognitivemarketresearch.com/blog/how-the-2025-tariffs-are-redefining-u-s-agriculture-supply-chain-disruptions-cost-pressures-and-strategic-responses). The U.S. government's proposed $10–15 billion farm aid package reflects the sector's vulnerability. Investors should consider diversification strategies, as crops with inelastic demand (e.g., California almonds) outperform those reliant on Chinese markets, a point also discussed in the FPRI analysis.

Manufacturing: Supply Chain Reconfigurations and the "China+1" Strategy

U.S.-China trade tensions have disrupted global manufacturing dynamics, with the GEP Global Supply Chain Volatility Index showing a sharp decline in U.S. manufacturing orders after a stockpile surge, as noted in the World Economic Forum report. Chinese manufacturers, however, are projected to grow by 2.9% in 2025, driven by domestic demand and government incentives for equipment upgrades, according to OilPrice reports (https://oilprice.com/Energy/Energy-General/Rare-Earths-Index-Rises-as-Geopolitics-Tightens-Supply-Chains.html).

The Trump administration's 55% tariff on Chinese semiconductor exports has forced U.S. firms to reconsider production locations, with many adopting a "China+1" strategy to diversify into Southeast Asia and Europe, per the OilPrice piece. This shift has increased capital expenditures and logistics costs, dampening near-term profitability for companies like Qualcomm and Micron Technology, as discussed in the FPRI analysis. Investors should weigh the long-term benefits of reduced geopolitical risk against short-term operational challenges.

Rare Earth Elements: Strategic Leverage and Price Volatility

China's dominance in rare earth elements (REEs) has amplified its geopolitical leverage, with export restrictions driving neodymium and praseodymium prices to two-year peaks, as noted in the FPRI analysis. Data reported in trade coverage indicates that neodymium oxide prices surged 26.87% in 2025, while praseodymium oxide rose 26.26%, trends discussed in the OilPrice piece. These trends are supported by U.S. investments in domestic production, such as the Department of Defense's $400 million equity stake in MP Materials, referenced in the World Economic Forum report.

However, China's control over 63% of global REE production and 90% of processing capacity ensures its influence over pricing and supply chain stability, a point also raised in the Cognitive Market Research analysis. The U.S. plans to impose a 25% tariff on neodymium-iron-boron (NdFeB) magnets from China in 2026, but its impact will be limited as these magnets are already embedded in domestic components. Investors should prioritize companies with diversified REE sourcing or recycling capabilities.

Conclusion: Navigating the New Normal

The U.S.-China trade conflict has created a landscape of volatility and opportunity. Semiconductor firms must balance compliance with innovation, while agricultural and manufacturing players face structural shifts in demand and supply chains. Rare earth elements remain a strategic asset, with prices likely to remain elevated due to geopolitical tensions. Investors should adopt a sector-specific approach, leveraging data-driven insights to hedge against policy risks while capitalizing on emerging opportunities.