Navigating the New Trade Landscape: Opportunities and Risks After the China-US Truce

The recent China-U.S. trade truce, effective May 12, 2025, has injected a fragile optimism into global markets. While tariffs have been slashed—U.S. rates dropped from 145% to 30%, and China’s fell from 125% to 10%—the underlying structural disputes remain unresolved. For investors, this creates a critical moment to reallocate capital toward sectors poised to benefit from short-term relief while hedging against lingering risks. The key is to prioritize industries with supply chain resilience, geographic diversification, and exposure to strategic materials.

Sector-Specific Opportunities: Where to Deploy Capital Now

1. Rare Earth Minerals: The New “Oil” of Strategic Industries
The truce hasn’t diluted China’s dominance over rare earth elements (REEs), which are vital for EVs, defense systems, and renewable energy. Beijing’s export controls on neodymium and dysprosium—critical for magnets in electric motors—remain intact. With the U.S. sourcing 70% of its rare earth needs from China, industries like EV manufacturing and defense are vulnerable.

Actionable Insight:
Invest in companies with diversified REE supply chains or those securing long-term contracts with Chinese suppliers. Tesla’s push to lock in neodymium for its Optimus robots underscores this trend. Monitor stocks like Lynas Corporation (LYSDF), a rare earth miner with Australian operations, and MP Materials (MP), the U.S.’s largest rare earth processor.

2. Technology and Auto Manufacturing: Tariff Relief Fuels Recovery
The truce’s exemption of semiconductors and electronics from punitive tariffs has eased pressures on tech supply chains. Automakers also benefit, with U.S.-U.K. trade deals reducing car tariffs to 10%. However, the U.S. semiconductor restrictions on China and Beijing’s industrial subsidies persist, creating a precarious balance.

Actionable Insight:
Look for automakers with diversified production hubs. Tesla (TSLA) and Ford (F) are advancing regional manufacturing, while Nvidia (NVDA) and ASML Holding (ASML)—key semiconductor players—could gain from reduced supply chain bottlenecks.

3. Deep-Sea Mining: A Risky but Lucrative Diversification Play
The Metals Company (TMC) is pioneering deep-sea mining to extract polymetallic nodules rich in nickel, cobalt, and copper—critical for EV batteries. While this sector faces environmental backlash, it offers a path to reducing reliance on Chinese REE exports.

Actionable Insight:
Consider The Metals Company (TMC) for high-risk, high-reward exposure. Pair this with ESG-focused funds to mitigate governance concerns, as seen in Hester’s divestment from Mineral Resources.

Risks to Watch: Why the Truce Isn’t a Forever Fix

1. Unresolved Structural Issues
The truce sidesteps forced tech transfers, Chinese subsidies, and South China Sea disputes. A Goldman Sachs report notes a 35% recession risk for the U.S.—down from earlier estimates—but warns that unresolved trade tensions could reignite volatility.

2. Geopolitical Volatility
U.S. port data reveals halted cargo shipments from China—a rare post-pandemic disruption. Add to this President Trump’s proposed 100% tariff on foreign films, and markets face unpredictable policy shifts.

3. Supply Chain Fragility
Despite tariff cuts, industries reliant on rare earths or Chinese-made semiconductors remain exposed. The U.S. Department of Defense’s $1.2 billion allocation to rare earth processing hints at long-term solutions but won’t resolve near-term shortages.

Strategic Hedging: Protecting Gains in an Uncertain Landscape

1. Short-Term Plays with Built-In Safeguards
- Buy into REE and tech stocks, but pair them with inverse ETFs like PRO or SPXU to offset market swings.
- Allocate to gold—despite its recent dip—since unresolved geopolitical risks and inflation could reignite demand.

2. Geographic Diversification
Shift exposure to markets less dependent on China-U.S. trade, such as European tech firms (e.g., ASML) or ASEAN-based manufacturers. The U.S.-U.K. trade deal’s $10 billion Boeing requirement also signals opportunities in aerospace.

3. ESG-Driven Diversification
Invest in funds prioritizing governance reforms, like those avoiding companies tied to unresolved allegations (e.g., Hester’s exit from Mineral Resources). This aligns with rising investor scrutiny of ESG compliance.

Final Call to Action: Act Now, but Stay Nimble

The trade truce is a tactical reprieve, not a lasting peace. Investors must capitalize on near-term opportunities in rare earths, tech, and deep-sea mining while hedging with gold, inverse ETFs, and geographically diversified portfolios. The clock is ticking on this 90-day pause—act swiftly to position for gains, but remain ready to pivot as structural disputes resurface.

The next 12 months will test supply chain resilience and geopolitical resolve. Those who balance ambition with caution will thrive.