Navigating the U.S.-China Trade Truce: Tech and Energy Plays in a Post-Tariff World

The U.S.-China trade relationship has entered a precarious phase of “easing tensions” marked by a temporary truce, layered tariffs, and softening inflation. This fragile détente creates a narrow window for investors to position in sectors benefiting from reduced trade friction, while navigating risks tied to expiring tariff pauses and Federal Reserve policy uncertainty. For tech and energy investors, the calculus hinges on near-term opportunities in semiconductor firms and critical minerals plays, tempered by caution toward industries still entangled in trade disputes.

The Tariff Truce: A Fragile Foundation for Tech Recovery

The May 2025 agreement to reduce reciprocal tariffs from 125% to 10% (with a 20% fentanyl-related duty remaining) marks a critical reprieve for U.S. technology firms reliant on Chinese manufacturing and inputs. . Semiconductor companies like Intel (INTC) and NVIDIA (NVDA) stand to gain the most. Their supply chains, strained by prior tariffs and export controls, now face reduced logistical and cost pressures. For instance, NVIDIA's data center and AI chip sales—which rely on Chinese fabrication partners—could see margin improvements as input costs stabilize.

However, the truce's expiration in July 2025 looms large. Investors should prioritize firms with diversified supply chains or those directly benefiting from China's rare earth commitments. The agreement's six-month rare earth export window, while temporary, could alleviate shortages of materials like neodymium (used in magnets for EV motors), giving an edge to companies like Broadcom (AVGO), which sources components for 5G infrastructure.

Energy Sector: Critical Minerals and the Truce Dividend

The U.S.-China deal's rare earth provisions also favor energy and industrial stocks exposed to clean energy transitions. Baker Hughes (BKR), a leader in drilling equipment and renewable energy infrastructure, could benefit from China's rare earth supply assurances. Rare earth magnets are integral to wind turbines and EV batteries, and Baker Hughes' partnerships with automakers and utilities position it to capitalize on renewed demand.

Meanwhile, the Fed's policy crossroads adds urgency. With May's CPI inflation at 0.1% (year-over-year at 3.8%), the central bank faces pressure to pause rate hikes or even consider cuts. This environment favors equity markets broadly, but energy and tech—both sensitive to interest rates and economic growth—could see outsized gains if the Fed signals a shift.

The Fed's Crossroads: PPI Data Will Be the Catalyst

Investors must monitor the Producer Price Index (PPI) for clues on whether inflation's decline is entrenched. A significant drop in input costs could embolden the Fed to pivot, boosting risk assets. For tech and energy stocks, this would amplify the tailwinds from tariff relief.

Risks and Caution: Steel and the Truce's Sunset Clause

Not all sectors share in the optimism. U.S. steel producers like United States Steel (X) remain vulnerable to Section 232 tariffs, which rose to 50% in June 2025. These tariffs, layered atop China's retaliatory duties, squeeze margins and limit pricing power. Investors should avoid overexposure to steel and other tariff-sensitive industries until the truce is extended or trade barriers are permanently lowered.

Investment Strategy: Selective Overweight in Tech and Energy

• Overweight:
• Semiconductors: NVIDIA and Intel for their exposure to AI and data center demand.
• Critical Minerals Plays: BAKER HUGHES and companies with rare earth supply agreements.
• Underweight:
• Steel: U.S. Steel and other manufacturers until Section 232 tariffs ease.
• Monitor:
• July 9 tariff truce expiration and PPI data for signs of Fed policy shifts.

Conclusion: A Delicate Opportunity, Navigated with Precision

The U.S.-China trade truce offers a fleeting opportunity to profit from reduced friction in tech and energy, but the path is fraught with deadlines and policy risks. Investors should prioritize firms with supply chain flexibility, exposure to China's rare earth commitments, and resilience to Fed tightening. With inflation easing and the Fed's next move hanging in the balance, the coming months will test whether this truce evolves into a lasting détente—or collapses into renewed escalation. For now, the data and the truce's terms suggest a tactical tilt toward semiconductors and energy, with strict risk management in sectors still trapped in the tariff crossfire.