US-China Trade Truce: Navigating Sectors for Profit in a Volatile Landscape

The U.S.-China trade framework announced in June 2025 marks a fragile but consequential pause in a years-long trade war. While the agreement is temporary—lasting 90 days—the reductions in tariffs and resolution of critical supply chain bottlenecks offer strategic investment opportunities. Investors must navigate sectors where the truce has immediate impacts while remaining vigilant to geopolitical risks. Here's how to capitalize on the truce without ignoring the volatility.

The Tech Sector: Semiconductors and Supply Chain Relief

The trade framework's most significant win for investors lies in its resolution of rare earth mineral exports and tech restrictions. China's suspension of rare earth curbs, which threatened global semiconductor production, has alleviated pressures on companies reliant on these materials. U.S. firms like Intel (INTC) and Applied Materials (AMAT), which supply chip-making equipment, stand to benefit as production bottlenecks ease.

The agreement also paves the way for U.S. tech companies to resume selling advanced semiconductors to China, provided Beijing complies with rare earth export terms. Investors might consider semiconductor ETFs like SOXX (iShares PHLX Semiconductor ETF) to capture broad sector momentum. However, risks persist: U.S. restrictions on Huawei's Ascend chips remain unresolved, and the 90-day window creates uncertainty for long-term contracts.

Automotive and Advanced Manufacturing: A Supply Chain Reset

The automotive sector has been a casualty of U.S.-China trade tensions. Tariffs on imported steel and aluminum, coupled with rare earth shortages, inflated production costs. The framework's reduction in tariffs and rare earth access could reverse this trend. Automakers like General Motors (GM) and Ford (F), which rely on Chinese-made magnets for electric vehicle (EV) motors, are now positioned to stabilize production.

The trade truce also benefits EV battery manufacturers. Companies such as Cathode Materials (CMC) and Tesla (TSLA), which depend on lithium and cobalt imports, may see reduced input costs. However, the lingering 25% Section 232 tariffs on steel and aluminum mean cost pressures are far from over. Investors should prioritize automakers with diversified supply chains or exposure to U.S.-China EV demand.

Critical Minerals and Mining: The Rare Earth Play

Rare earth minerals—vital for semiconductors, EVs, and defense tech—are now a focal point. China's dominance in rare earth production (90% of global supply) and its recent export restrictions had created a strategic vulnerability for the U.S. The framework's requirement for Beijing to resume rare earth exports creates a short-term opportunity in mining stocks.

Investors might consider ETFs like GDXJ (VanEck HFR Junior Gold Miners ETF), which includes small-cap miners, or focus on pure-play rare earth companies like MP Materials (MP), the largest U.S. rare earth producer. However, the long-term risk remains: China could renege on its commitments if political tensions flare anew.

Financial Markets: Currency and Equity Risks

The trade truce has calmed markets but hasn't erased volatility. The U.S. dollar's strength, fueled by Fed rate hikes, continues to pressure emerging market currencies like the yuan. Investors in Chinese equities—such as through the iShares MSCI China ETF (MCHI)—should monitor currency fluctuations closely.

Meanwhile, U.S. bond yields, which have risen amid inflation fears, could complicate tech firms' borrowing costs. The framework's success hinges on leaders' approval, so political developments—like the U.S. visa restrictions on Chinese students or ongoing fentanyl disputes—are critical watchpoints.

Actionable Themes and Caveats

1. Short-Term Plays:
2. Semiconductor ETFs (SOXX) for tech supply chain relief.
3. Rare earth miners (MP) or critical minerals ETFs (GDXJ) for commodity exposure.

4. Automakers (GM/F) benefiting from reduced input costs.

5. Long-Term Caution:

6. Avoid overcommitting to China-linked equities until the truce is extended beyond August 2025.

7. Monitor the U.S. Section 232 tariffs on steel/aluminum, which remain in place and could reignite trade tensions.

8. Geopolitical Risks:

9. The truce's fate rests on presidential approvals and ongoing dialogue. A collapse in U.S.-China relations could trigger a market sell-off.

Conclusion

The U.S.-China trade framework is a tactical reprieve, not a lasting solution. Investors can capitalize on short-term opportunities in tech, automotive, and critical minerals but must pair these bets with strict risk management. The 90-day window demands agility: profits may materialize quickly, but losses could follow just as swiftly if the truce unravels. For now, the trade truce offers a chance to profit—but only for those willing to act decisively and exit before the next storm hits.