US-China Trade Truce Offers Clarity, But Risks Remain: Where to Invest Now

The partial US-China trade deal announced in June 2025 marks a fragile truce in a conflict that has rattled global supply chains for years. While the agreement reduces some tariffs and restores rare earth exports, lingering disputes over fentanyl, semiconductors, and industrial goods ensure volatility remains. For investors, the path ahead is a mix of short-term caution and long-term opportunity—particularly in sectors tied to critical minerals, digital infrastructure, and regional diversification. Here's how to navigate the landscape.

The Deal's Near-Term Impact: A Fragile Calm

The agreement eases immediate pressures by resolving the rare earth impasse. China's resumption of exports to the U.S. could stabilize supply chains for industries like automotive (e.g., Tesla's batteries) and aerospace (Boeing's precision parts). The Commerce Department's pledge to lift countermeasures once shipments resume suggests a short-term reprieve for companies reliant on these materials.

However, remaining tariffs—including a 20% duty on fentanyl-related goods and 50% levies on steel—keep risks elevated. . Analysts warn that prolonged disputes over technology and intellectual property could reignite trade tensions. For now, markets are pricing in cautious optimism: the MSCI Asia-Pacific Index rose 2.3% in June, but volatility indices remain above pre-trade-war levels.

Long-Term Winners: Critical Minerals and Digital Infrastructure

The deal's most significant shift lies in rare earths and related commodities. China's agreement to streamline exports removes a chokepoint for industries reliant on neodymium (for magnets) and lithium (for batteries). This benefits semiconductor manufacturers (e.g., ASML, Lam Research) and EV producers (e.g., Tesla, BYD) that had faced rising input costs.

But the bigger play is in critical mineral supply chains. ASEAN's strategic position as a hub for nickel (Indonesia), cobalt (Philippines), and rare earths (Vietnam) positions it to become the world's battery and semiconductor materials supplier. The U.S. is already courting these nations via bilateral agreements modeled on Japan's JOGMEC framework, which secured rare earth dominance. Investors should monitor equity stakes in ASEAN miners (e.g., Indonesia's Antam, Malaysia's Sime Darby) and infrastructure funds targeting regional logistics.

ASEAN's Economic Integration: The New Supply Chain Frontier

The ASEAN Economic Community's 2026-2030 plan aims to harmonize trade rules and double intra-regional trade, while its Digital Economy Framework Agreement (DEFA) could unlock a $1 trillion tech sector by 2030. For investors, this means:
- Tech infrastructure plays: Companies like Singapore's Singtel and Thailand's CAT Telecom, expanding 5G and cloud networks.
- Renewables and green tech: Vietnam's polysilicon initiatives and Indonesia's geothermal projects align with global ESG trends.
- Regional logistics: Ports in Malaysia (Port Klang) and Thailand (Laem Chabang) stand to benefit as ASEAN diversifies supply chains away from China.

Market Reactions: Where to Look Now

• Equities: Semiconductor stocks (e.g., AMD, NVIDIA) and EV suppliers (e.g., Tesla, CATL) could rally if rare earth stability lowers costs.
• Commodities: Lithium and cobalt futures may stabilize, but rare earths (e.g., cerium, praseodymium) could see spikes if supply remains tight.
• Currencies: ASEAN currencies (MYR, IDR) may strengthen as FDI flows increase, though the U.S. dollar's resilience remains a wildcard.

Investment Recommendations

1. Short-Term: Focus on diversified commodity ETFs (e.g., iShares Rare Earth & Strategic Metals ETF) and semiconductor stocks with exposure to ASEAN supply chains.
2. Long-Term: Allocate to ASEAN infrastructure funds and critical mineral miners, while hedging with volatility ETFs (e.g., XIV) to mitigate tariff risks.
3. Avoid: U.S. steel and aluminum companies (e.g., Nucor, Alcoa) until Section 232 tariffs are renegotiated.

Final Word

The U.S.-China truce is a step toward stability, but the road to durable trade normalization is littered with potholes. Investors should prioritize sectors with regional diversification (ASEAN minerals, digital infrastructure) and commodity exposure tied to EV and tech demand. For now, the playbook remains: lean into clarity, but keep an eye on the horizon for the next storm.