The Sino-US Trade Truce Extension and Its Implications for Asian Equities

The extension of the Sino-US trade truce in August 2025 has injected a dose of clarity into a market that had been teetering on the edge of chaos. By freezing tariffs at 30% on Chinese imports and 10% on U.S. goods, the agreement has bought time for both sides to negotiate a broader resolution. For Asian equities, particularly in China and Hong Kong, this pause is a lifeline—a chance to recalibrate supply chains, stabilize investor sentiment, and position for the next phase of global trade dynamics. But as any seasoned investor knows, this is not a permanent solution. It's a tactical pause, and the market must prepare for both the opportunities and risks it creates.

The Truce as a Stabilizer, Not a Cure

The 90-day extension, announced on August 11, 2025, averted a potential trade war that could have crippled global supply chains. U.S. retailers, semiconductor manufacturers, and logistics firms have all benefited from the temporary stability. For example, the resumption of rare earth exports from China to the U.S. has eased pressure on critical materials used in electric vehicles and defense tech. Chinese Vice Premier He Lifeng's recent talks with U.S. Treasury Secretary Scott Bessent signaled a willingness to address U.S. concerns over fentanyl-linked tariffs and rare earth access. However, unresolved issues—such as U.S. export controls on advanced semiconductors and China's purchases of Russian oil—remain ticking time bombs.

Sectoral Rotations: Tech and Materials in the Spotlight

The truce has triggered a rotation into sectors poised to benefit from nearshoring and supply chain diversification. In China, the technology sector has seen a rebound in investor confidence, with the Shenzhen Component Index surging 12% in July 2025. Companies like TSMC and Samsung, which rely on cross-border semiconductor manufacturing, have regained momentum as the U.S. relaxes some export restrictions. For instance, the U.S. allowing Nvidia to sell its H20 AI chips to China—albeit with a 15% revenue share to the U.S. government—has created a hybrid model of access and control. This “monetization of trade policy” is a novel approach, but it underscores the U.S. administration's focus on strategic leverage over pure market access.

Meanwhile, the materials sector is experiencing a renaissance. China's rare earth exports hit a 13-year high in June 2025, driven by both domestic demand and U.S. procurement needs. For investors, this points to opportunities in junior explorers like Faraday Copper, which secured $48.8 million for its Arizona-based project, and major producers like Capstone Copper Corp., which reported strong Q2 results. However, the sector is not without risks. U.S. refined copper imports surged 129% in early 2025, creating a potential oversupply that could pressure LME prices in the short term.

Hong Kong: A Bridge Between East and West

Hong Kong's role as a financial and trade hub has been amplified by the truce. The city's logistics and digital infrastructure firms are benefiting from the resumption of cross-border trade flows. For example, A.P. Møller – Mærsk reported a 15% increase in container demand in Q3 2025, reflecting the renewed movement of goods between China and the U.S. However, Hong Kong investors must also navigate the risks of U.S. “secondary tariffs” on countries perceived to align with anti-American policies—a threat that could disrupt trade financing and cross-border investments.

Strategic Positioning: Navigating Uncertainty

For investors, the key is to balance optimism with caution. Here's how to position your portfolio:
1. Diversify Across Tech and Materials: Allocate to both junior explorers (e.g., Faraday Copper) and major producers (e.g., Capstone Copper Corp.) to hedge against supply chain volatility.
2. Monitor Regulatory Shifts: Keep a close eye on U.S. export control policies and China's rare earth licensing. The VanEck Semiconductor ETF (SMH) has rebounded 18% in July 2025, but its long-term trajectory depends on regulatory clarity.
3. Leverage Energy Transition Trends: The demand for copper in EVs and data centers is structural. Companies like Tesla, which saw a 25% surge in Q2 2025, are prime beneficiaries.
4. Hedge Against Geopolitical Risks: Consider defensive plays in logistics and financial services, which are less exposed to direct trade disruptions.

The Road Ahead: Truce or Turmoil?

The November 2025 expiration date looms large. If negotiations stall, tariffs could escalate again, sending shockwaves through global markets. However, the truce has already demonstrated that both sides have an interest in maintaining stability. For now, investors should treat the extension as a window of opportunity—a chance to lock in gains in sectors like semiconductors and materials while hedging against the next round of geopolitical fireworks.

In the end, the Sino-US trade truce is a reminder that markets thrive on predictability. By staying agile and informed, investors can navigate the uncertainty and position themselves to capitalize on the next phase of this high-stakes game.