Stocks surged on the much-awaited Trump-Xi call; Gold stumbled

·       Trump and Xi may soon visit China and the US; High-level Chinese and US officials will soon meet for the next stage of trade negotiations

Wall Street was buoyed for the last few days by the hope of a Trump-Xi call, as it may help the progress of US-China stalled trade talks over alleged Chinese restriction of rare earth materials despite the Geneva agreement.  The market was expecting an imminent telephone talk between Trump and Xi, which may result in the withdrawal of Trump’s Fentanyl levy of 20% on China (to be eventually paid by Americans).

At late midnight, June 3, 2025, Trump posted in his Truth: “I like President XI of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!”

Trump-Xi has a call on Thursday, June 5, 2025:

Although previously, there was chatter by Trump's close aides that the Trump-Xi call may happen on Friday, June 6, it indeed happened one day early Thursday. As per Xinhua/CCTV, Chinese President Xi Jinping on Thursday held phone talks with U.S. President Donald Trump at the latter's request.

Xi reportedly told Trump:

·       The US should withdraw its measures against China

·       The US should remove negative measures on China

·       The US and China should increase cooperation in the economy and trade

·       The US and China should reduce misunderstandings

·       China implemented the Geneva agreement

·       Trump is welcome to visit China again

·       The two sides should enhance exchanges in diplomatic, economic, trade, military, and law enforcement.

·       China’s President Xi and Trump agree to start a new round of talks ASAP

·       It's important to dispel disruptions to China-US relations

·       A consensus has been reached. Both sides should abide by it

·       Both sides should make good use of the established economic and trade consultation mechanism

·       The US should deal with Taiwan cautiously

·       Dialogue and cooperation are the only right choices for China and the US

·       The US and China should avoid conflicts because of Taiwan

·       The US should avoid a very small number of Taiwan independence separatists dragging China and the US into a dangerous situation of conflict and confrontation

Trump also posted on his Truth after his call with Xi: June 5, 2025

“I just concluded a very good phone call with President Xi of China, discussing some of the intricacies of our recently made and agreed to Trade Deal. The call lasted approximately one and a half hours and resulted in a very positive conclusion for both Countries. There should be no longer any questions respecting the complexity of Rare Earth products. Our respective teams will be meeting shortly at a location to be determined. We will be represented by Secretary of the Treasury Scott Bessent, Secretary of Commerce Howard Lutnick, and United States Trade Representative, Ambassador Jamieson Greer.

During the conversation, President Xi graciously invited the First Lady and me to visit China, and I reciprocated. As Presidents of two Great Nations, this is something that we both look forward to doing. The conversation was focused almost entirely on TRADE. Nothing was discussed concerning Russia/Ukraine or Iran. We will inform the Media as to the scheduling and location of the soon-to-be meeting. Thank you for your attention to this matter!”

Summary of Trump’s comments about Xi with the media- Speaking outside the White House as he greets Germany’s Chancellor Merz.

·       Trump reiterates call with China’s President Xi went very well

·       Trade talks have never been off track. We straightened out the complexity. We'll meet with their top people

·       We have a deal with China and want to make sure all understands it

·       In good shape with the China trade deal

·       I'll be going to China at some point

·       Xi will be coming here

·       We're straightening out rare earths

Early Thursday, China's Commerce Minister met with France's Trade Minister; China's Commerce Minister:

·       It's normal to have disputes in bilateral trade cooperation; the key is to find a solution through dialogue

·       We hope France will push the EU to work with China in the same direction and properly resolve trade differences

·       China Vice President Han Zheng meets the US delegation for a high-level track two dialogue

·       China-US relations at 'critical juncture'

The Office of the U.S. Trade Representative (USTR) sent letters to nearly all U.S. trading partners, urging them to submit their best trade offers by June 4, 2025, as part of the Trump administration’s push to finalize trade deals before the July 8, 2025, deadline, when a 90-day tariff pause ends. The letters, confirmed by White House Press Secretary Karoline Leavitt, requested proposals on tariffs and quotas for U.S. industrial and agricultural products, non-tariff barrier resolutions, digital trade, and economic security commitments.

The USTR aims to evaluate responses quickly and propose a “landing zone” for negotiations, potentially including reciprocal tariff rates. Active talks involve the EU, Japan, Vietnam, India, and others, though only a framework agreement with the UK has been reached. The letters emphasize urgency, warning that tariffs will persist under alternative legal authorities despite a court ruling against Trump’s use of the IEEPA.

Only the UK has reached a preliminary trade agreement, announced as a “historic” deal to open markets and raise revenue while maintaining a 10% reciprocal tariff. Active negotiations continue with the EU, Japan, Vietnam, India, and others, but no new finalized deals have been reported as of June 4, 2025.

The EU faces a 20% tariff, with Trump threatening a 50% increase if talks fail. USTR’s Greer met with EU Trade Commissioner Maroš Šefčovič on June 4, 2025, reporting progress toward “reciprocal trade.” The EU is preparing countermeasures for mid-July if no deal is reached, but prefers negotiation. The EU declined to comment on the USTR letter but is engaging actively, with Trump set to meet Germany’s Chancellor Friedrich Merz on June 5, 2025.

EU's Trade Czar Seferovic:

·       Talks with the US are to continue.

·       On US steel tariffs: We discussed this with USTR Greer and told him we strongly regret it, and it does not help negotiations.

·       US Sanctions Threaten Europe's Russian Gas Lifeline

·       We have the same challenges as the US on steel, which is global overcapacity.

·       I still believe in negotiations with the US. I believe we can achieve a positive result, but we are ready to defend our interests.

·       Discussions on EU countermeasures are ongoing, and we are following a rules-based procedure.

·       We discussed things we believe we could work better together with the US, such as AI chips, semiconductors, critical materials, and energy security.

·       We agreed on how to restructure the focus of our negotiations with the US

·       I informed my Chinese counterpart about the alarming situation in the car sector because of the rare earth magnet restrictions

·       The main message at trade talks in Paris is strong support for multi-lateral ties and a strong rules-based system

·       We have agreed to do everything at our disposal to help the WTO chief

·       We must reduce our dependency on China

·       The majority of WTO trade chiefs want WTO reform

·       Re-engagement between Australia and the EU in our free trade agreement negotiations, we believe we can achieve substantial progress this year.

·       Constructive discussion with Greer, we are advancing in the right direction.

·       The Chinese minister's information was different, and we agreed we would clarify the rare earth situation as soon as possible.

·       EU Commission urges EU governments to speed up the implementation of reforms and investments under the EU's recovery plan as of August.

Japan faces a 24% reciprocal tariff and a 25% auto tariff. USTR’s Greer met Japan’s Economic Revitalization Minister Akazawa Ryosei, with talks ongoing to avoid further escalation. No deal has been finalized, but a potential agreement is eyed before the mid-June G7 summit.

Canada faces a 50% tariff on steel and aluminum (up from 25% on June 4, 2025) and a 25% tariff on most goods, with USMCA-compliant goods now exempt. Intensive negotiations are underway, with Prime Minister Mark Carney preparing reprisals if talks fail. The USTR is addressing USMCA labor issues, with reviews of alleged workers’ rights denials at Mexican facilities like Superior Industries and Modern Metal Alloys.

Canada's PM Carney:

·       Trade discussions with the White House are ongoing; US steel and aluminum tariffs are illegal

Alberta Premier Smith:

·       Canada is optimistic about a near-term trade deal with the US

·       We can fill a new oil pipeline if we build it

Mexico faces a 25% tariff on most goods (USMCA-compliant goods exempt) and a 50% steel and aluminum tariff. President Claudia Sheinbaum is focusing on negotiation over retaliation. The USTR continues USMCA-related reviews, including labor disputes at Mexican firms like Aludyne Automotive.

Mexico's President Sheinbaum:

·       Measures will only take place if there is no agreement, and it won't be an eye for an eye

·       Mexico's tariff on US steel may raise product prices

·       Mexico doesn't rule out tariffs on US steel

·       Mexico is expected to renew its antitrust approval of Nippon Steel's $14.9 billion bid for US Steel as soon as Thursday.

Brazil faces a 10% baseline tariff. It has passed a reciprocity bill but is holding off on retaliation, exploring WTO options while engaging in USTR talks. No specific progress on a deal was reported by June 4, 2025; No specific bilateral meetings were noted, but Brazil is among the countries receiving the USTR letter.

Vietnam faces a 46% reciprocal tariff. It offered to drop tariffs on U.S. goods to zero and sent diplomats to Mar-a-Lago, but no deal has been finalized. In the June 4 Senate Testimony, the US Trade Secretary clarified that the Trump administration is not going to provide any trade concessions Chinese export proxy country like Vietnam, unless it reduces its supply chain dependency on China. The USTR Greer held a virtual meeting with Vietnam’s Minister of Industry and Trade Nguyen Hong Dien on April 24, 2025, with ongoing talks.

US Trade Representative (USTR) Greer:

·       Negotiations with the EU are advancing quickly

·       Meeting in Paris with the EU's Trade Chief Sefcovic was very constructive

·       The meeting indicates a willingness by the EU to work with the US to find a concrete way forward to achieve reciprocal trade

·       I am pleased that negotiations are advancing quickly with the EU

US Commerce Secretary Lutnick's testimony to Senate panel:

·       We're improving chip commitments to more than $300 bln

·       The 232 probes are reviving manufacturing in the US

·       Lutnick, citing 232: We will protect the US aerospace industry

·       I expect other nations to play ball and negotiate tariffs

·       Aircraft parts tariff probe by month's end

·       Lutnick comments on steel for the aerospace industry: Steel tariffs are just a cost issue, not an access issue

·       50% of AI computing must be in the US

·       We're renegotiating Chips Act contracts to benefit the US taxpayer

·       President Trump to Use Emergency Powers to Boost U.S. Critical Minerals Industry

·       We're considering production needs for the aircraft backlog

·       Senator Graham presses US Commerce Secretary Lutnick on China buying Russian oil

·       The UAE chips pact isn't legally binding. It's a framework

·       I'm looking at the impact of Chinese ship fees on exports

External Affairs VP at the Aluminum Association:

·       We need a consistent, predictable trade and tariff policy to plan for investment

·       The Aluminum Association urges the US administration to take a tailored approach that reserves high tariffs for bad actors.

·       Tariffs alone will not increase US primary aluminum production nor support the $10 billion invested by the downstream industry.

As per reports, China is planning to order hundreds of Airbus planes as Xi Jinping seeks to build closer ties with Europe. Beijing is in talks with the European aerospace giant to order up to 500 jets against the backdrop of the trade war with the US. If completed, the order could be announced at a summit in the Chinese capital next month where Xi will host Friedrich Merz, the new German chancellor, and Emmanuel Macron, the president of France.

China is leveraging its rare earth materials/magnets dominance in trade & diplomatic war.

China is leveraging its rare earth materials (REM) and magnet dominance as a potent nuke weapon in the trade war, particularly against the U.S., with ripple effects on the EU and India. The April 2025 export controls, slow license approvals, and demands for non-military use assurances have disrupted global supply chains, raising costs and threatening production in EVs, defense, and tech.

The U.S. faces national security risks, the EU grapples with industrial shortages, and India sees both a crisis and an opportunity to develop its REE sector. Trump’s trade war escalation and the urgency for the Xi call suggest ongoing tensions, with China maintaining leverage. US auto group urged "immediate and decisive action" on access to Chinese rare earth materials/magnets.

Conclusions

China believes in protocol-based trade diplomacy, and thus, there may not be any dramatic trade war truce between the US and China after just one round of telephonic talks between Trump and Xi. But as a courtesy, Trump may withdraw his Fentanyl tariff (20%) to ease Chinese restrictions on REM exports. China is also in the advanced stage of global trade diplomacy, from the EU to the Middle East and South America to Asia, taking advantage of US hegemony and gunpoint trade diplomacy policy.

Market impact

On mid-Thursday, June 4, 2025, Wall Street futures, USD surged on the Trump-Xi phone call; Gold, UST slid on the progress of US-China trade talks and an expected less hawkish Trump trade & tariff policy.

Technical outlook: DJ-30, NQ-100, and Gold

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 42600) now has to sustain over 42900 for a further rally towards 43200/43600*-44000/45300 in the coming days; otherwise sustaining below 42800, DJ-30 may again fall to 41900/41700-41400/41000* and further 40600/40100-39200/38000 in the coming days.

Similarly, NQ-100 Future (21600) has to sustain over 22000 for a further rally to 22400/22500-22700/23000 in the coming days; otherwise, sustaining below 21900, NQ-100 may again fall to 21900/20900-20700/20200 and 19890/18300-17400/16400in the coming days.

Also, technically Gold (CMP: 3350) has to sustain over 3375-3395 for a further rally to 3405/3425*-3450/3505*, and even 3525/3555 in the coming days; otherwise sustaining below 3365, Gold may again fall to 3340/3320-3300/3280 and 3255/3225-3200/3165* and further to 3130/3115*-3075/3015-2990/2975-2960*/2900* and 2800/2750 in the coming days.