Weekly Buzz: Beijing or bust: The US president heads to China

This week, US president Trump heads to China for his first official visit since 2017. That was back in his first term, and no other American president has made the journey since. The meeting between him and China’s president Xi was originally slated for the end of March, but was pushed back after the Iran conflict broke out. What was already a closely watched meeting is now one of the most anticipated diplomatic events.

What’s going on here?

This summit won’t be a simple catch-up between counterparts. The relationship between the world's two biggest economies has been strained, to say the least, and few expect major breakthroughs. But with US midterm elections on the horizon, the president will be eager to bring home some tangible wins.

Top of the agenda will likely be trade. Both have used tariffs as economic weapons, and unwinding that tension will be tough. Complicating matters is the race for AI supremacy: the US holds a lead, but China is closing the gap, building out its tech infrastructure as it works around American export restrictions. China's dominance in rare earths, key ingredients in all things electronic, remains one of its strongest bargaining chips.

On the topic of trade, it’s in the interests of both economies to see the Strait of Hormuz reopened to all shipping, and the US has been pressing China to use its influence with Iran. Any progress there could start to bring oil prices down.

What’s the takeaway?

A summit like this is a reminder of how interconnected the world's economies are. American tech leans on Chinese rare earths. Chinese growth leans on US consumers. Even without a breakthrough, the tone set this week could shape how markets price the US-China relationship for months after. The smart response isn't to pick sides, it's to stay diversified enough so that no headline holds sway over your portfolio.

(For a portfolio that invests in both of the world’s biggest economies, see General Investing.)

In Other News: China's inflation comeback has a catch

China's Producer Price Index jumped to a nearly three-year high in April. Producer prices – or what businesses charge when goods leave the factory – rose 2.8% from a year earlier, a sharp acceleration from March's 0.5% and the fastest pace since July 2022. Consumer prices, meanwhile, picked up 1.2% year-over-year, beating analyst expectations.

On paper, this is good news for China. After more than three years of deflation, with too much supply and too little domestic demand keeping the economy in a downward loop, some inflation suggests the worst is over. That’s not the full story, though.

There are two kinds of inflation. The "good" kind comes from rising consumer demand: the economy heats up and people have money to spend. The "bad" kind comes from rising input costs: companies pay more for raw materials with no way to pass those costs to consumers who feel stretched. April's data is more of the latter, driven largely by surging oil prices.

China's cheap exports have kept global inflation in check for decades, but this data hints at that dynamic shifting. If the trend holds, companies with deep Chinese supply chains face a tough choice: absorb higher costs or pass them along, leading to stickier inflation globally.

These articles were written in collaboration with Finimize.