U.S. Equity Market Momentum Amid U.S.-China Trade Optimism: Strategic Positioning for Global Growth in a De-Risking World

The U.S. equity market in late 2025 has navigated a complex landscape shaped by the evolving U.S.-China trade relationship. A temporary tariff truce, extended in August 2025 to November 10, 2025, has provided a critical reprieve from escalating tensions, offering clarity to investors and businesses alike. This agreement, which reduced U.S. tariffs on Chinese imports from 145% to 30% and China's tariffs on U.S. goods from 125% to 10%, has directly influenced market dynamics, stabilizing supply chains and boosting investor confidenceUS-China Trade Deal 2025: A Turning Point in …^[1]. The S&P 500's 6.15% monthly gain in May 2025, its strongest performance in over a year, underscores the immediate positive impact of this de-escalationTrade Wars 2025: US-China Rivalry Reshaping Global …^[2].

Strategic Positioning in a De-Risking World

The temporary truce has not erased long-term structural challenges, but it has created a window for strategic positioning. Investors are increasingly prioritizing diversification and sector-specific opportunities. Technology, communication services, and financials remain focal points, driven by corporate earnings strength and reshoring trendsU.S. Equity Market Outlook in 2025 - cfraresearch.com^[3]. However, the broader market is showing signs of broadening momentum, with manufacturing and industrial sectors benefiting from U.S. productivity gains and reduced trade uncertaintyUS-China Trade Deal 2025: A Turning Point in …^[1].

A key consideration is the shift toward value stocks over growth stocks, as investors seek resilience amid potential stagflationary risks. The U.S. economy's robust corporate financial health—characterized by strong profit margins and low leverage—provides a buffer against near-term volatilityU.S. Equity Market Outlook in 2025 - cfraresearch.com^[3]. Yet, the looming expiration of the tariff truce in November 2025 introduces uncertainty, with analysts anticipating modest corrections that could present buying opportunities for long-term investorsTrade Wars 2025: US-China Rivalry Reshaping Global …^[2].

Geopolitical and Economic Implications

China's strategic repositioning adds another layer of complexity. While the U.S. benefits from reduced tariffs, China has offset declining U.S. exports by expanding trade with Southeast Asia, Africa, and Europe. This shift has accelerated supply chain diversification, with companies exploring alternatives to China, including India and VietnamUS-China Trade Deal 2025: A Turning Point in …^[1]. However, India's gains have been limited, and transshipment risks—such as Trump's proposed 40% blanket tariff on Southeast Asian goods—could disrupt trade flowsUS-China Trade Deal 2025: A Turning Point in …^[1].

Geopolitically, China's creation of the SCO Development Bank and its leverage in trade negotiations (e.g., rare earth exports and agricultural boycotts) signal a broader challenge to U.S. economic dominanceTrade Wars 2025: US-China Rivalry Reshaping Global …^[2]. These moves highlight the need for investors to hedge against geopolitical fragmentation, which could reduce global GDP growth by 0.5% annually over the next decadeTrade Wars 2025: US-China Rivalry Reshaping Global …^[2].

Tactical Opportunities and Risks

For investors, the current environment demands a dual focus: capitalizing on near-term stability while preparing for potential volatility. Sectors poised to benefit from the tariff truce include those reliant on cross-border trade, such as consumer discretionary and industrials. Conversely, sectors exposed to prolonged trade tensions—such as agriculture and energy—remain vulnerableUS-China Trade Deal 2025: A Turning Point in …^[1].

The Federal Reserve's ability to manage interest rates is also under pressure, as U.S. average tariff rates have surged to 20%, driving inflation and reducing household disposable incomeUS-China Trade Deal 2025: A Turning Point in …^[1]. This stagflationary risk complicates monetary policy, making inflation-linked assets and defensive equities attractive hedgesU.S. Equity Market Outlook in 2025 - cfraresearch.com^[3].

Conclusion

The U.S. equity market's momentum in late 2025 reflects a delicate balance between trade optimism and geopolitical uncertainty. While the tariff truce has stabilized markets and supported broad-based growth, the unresolved structural issues between the U.S. and China necessitate a cautious, adaptive approach. Strategic positioning—emphasizing diversification, sector-specific opportunities, and risk management—will be critical for navigating a de-risking world. As the November 2025 expiration date approaches, investors must remain agile, leveraging potential corrections while monitoring the evolving trade landscape for long-term gains.