What to Expect From the U.S.-China Summit

May 13, 2026

AI Summary

5 min read

Ariana Salvatore, head of public policy research at Morgan Stanley, outlines measured expectations for the U.S.-China Summit scheduled for Wednesday, May 13th at 11 AM in Copenhagen. She argues that while the talks address trade, Taiwan arms sales, and the U.S.-Iran conflict, tangible progress will likely be limited to an extension of the current truce with modest relaxations—enough for some upside in Chinese risk assets, but not a major market rerating.

Trade Expectations

Salvatore anticipates discussions will center on phase one-style commitments rather than deep structural changes. This could involve increased Chinese purchases in agriculture and aerospace, high-level pledges on trade and investment, or targeted tariff relief to signal cooperation. However, she does not expect significant U.S. unilateral tariff cuts. China still faces about 30% effective tariffs, and it gained from the Supreme Court's recent invalidation of AIPA tariffs on other partners. The U.S. administration views elevated tariffs on China as strategically necessary to maintain separation from allies like Europe, Japan, and South Korea, making a broad tariff reset improbable.

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What you'll learn

1 (00:00) **U.S.-China Summit Expectations**
2 (00:48) **Trade Discussions**
3 (02:03) **Taiwan Arms Sales**
4 (02:22) **Iran Conflict and Strait of Hormuz**
5 (02:34) **Technology and Rare Earths**
6 (03:10) **Key Market Watches**

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Show Notes

Our Head of Public Policy Research Ariana Salvatore goes through the main topics on the table during the meeting between Presidents Trump and Xi: Taiwan, tariffs and the Iran conflict.

Read more insights from Morgan Stanley.

----- Transcript -----

Ariana Salvatore: Welcome to Thoughts on the Market. I'm Ariana Salvatore, Head of Public Policy Research for Morgan Stanley.

Today, I'll be talking about expectations heading into the U.S.-China summit this week and what investors should be watching.

It's Wednesday, May 13h at 11am in Copenhagen.

Despite the importance of the upcoming summit, we think expectations for tangible progress should remain relatively modest. Reporting ahead of the meeting indicates that the discussions will focus on trade, Taiwan arms sales, and the U.S.-Iran conflict. Across the board, our base case remains an extension of the current truce with limited areas of relaxation. That's probably enough to support modest upside for risk assets in China, but likely short of the kind of breakthrough needed for a material re-rating in risk premia.

Let's start with trade. We think the discussion here is likely to skew toward phase one style commitments rather than structural policy shifts. That could include additional Chinese purchases in sectors like agriculture and aerospace, or things like high-level trade and investment pledges. Or even limited tariff relief in key areas designed to demonstrate cooperation but without fundamentally changing the competitive dynamic between the two countries.

What we don't expect is a meaningful unilateral tariff reduction from the U.S. side heading into the summit. Remember, China still faces an effective tariff rate of around 30 percent, and it benefited the most of all our trading partners when the Supreme Court struck down the IEEPA tariffs earlier this year. As we noted at the time, that lowered its effective rate by roughly 7 percentage points.

Secondly, we think the administration continues to view higher tariff levels on China versus other trading partners as a strategic imperative. Said differently, the administration appears committed to maintaining some degree of structural separation between China and other trading allies like Europe, Japan, and South Korea. We think that means a large-scale tariff reset is unlikely in the wake of the summit or in the lead up.

On Taiwan, we also see limited room for meaningful policy change. President Trump has publicly referenced Taiwan arms sales in recent comments, but we think a major concession from China would be needed for a meaningful departure from many years of U.S. policy precedent.

The third issue on the agenda is the Iran conflict and the Strait of Hormuz. Reopening the strait is likely the area of greate