US and China Both Want a Stronger Yuan, Small Deal Possible... Positive for Industrial Metals

Following the U.S. and China’s decision to grant a 90-day tariff reprieve in their trade negotiations, there is an assessment that a partial agreement may also be possible in their currency talks. This is expected to have a positive impact on demand for industrial metals.

Choi Jin-young, a researcher at Daishin Securities, stated in a report titled "Both the U.S. and China Want a Stronger Yuan, a Positive for Industrial Metals" on May 16, 2025, that "the Chinese government also recognizes the need for a stronger yuan, which opens the door to a ‘small deal’."

First, Choi pointed out that after the U.S. and China decided to suspend tariffs on May 12, bookings for China-to-U.S. cargo shipments surged by 277% compared to the previous week, and risk appetite has also revived. He added, "Negotiations are not limited to trade. There is a second stage remaining," clarifying, "That is currency."

The two countries reportedly agreed to prepare a trade-investment-currency package by July, before the tariff reprieve expires. He noted, "The postponement of the currency report to June is not unrelated to this." This suggests that there is still room for further escalation in U.S.-China tensions.

Choi explained, "The reason the Donald Trump administration is demanding the opening of the currency market is simple. It is to appreciate the value of the yuan so that China will buy more American products." He also assessed that the remarks by U.S. Treasury Secretary Scott Besant, who said that China’s economic structure should be driven by consumption, were made in this context.

China is also feeling the need for a stronger yuan, as requested by the U.S. Choi noted, "Of course, considering the People’s Bank of China’s stance that ‘the currency market must be controlled within a predictable range,’ institutional change is unlikely," but added, "That does not mean China is rejecting a stronger yuan. The Chinese government also recognizes the need for a stronger yuan." Accordingly, he diagnosed that, in the case of currency issues, a partial agreement is possible even if the market is not fully opened.

Choi predicted, "The strengthening of Asian emerging market currencies, which are based on manufacturing, means stronger buying power for these countries and is a positive for industrial metal demand," adding, "The recovery momentum could spread across the entire industrial metals sector, including not only copper but also aluminum and nickel." He further commented, "Just as during the first Trump administration, there may continue to be noise, but unlike then, China now lacks the resilience (in real estate and domestic demand) to endure. The path to a ‘small deal’ remains open."