Both U.S. and China need each other's economies at the end of the day, says JPMorgan's Alex Wolf

Trade War & Negotiation Dynamics - JP Morgan suggests expectations for the US-China trade talks should be tempered, viewing them as another data point in ongoing negotiations [3] - A positive outcome might involve discussions on key issues like fentanyl, soybeans, or rare earths, but a grand bargain is unlikely [4] - Any truce is expected to be temporary, given China's increased leverage since the 2017-2018 trade war [4] - China's development and use of leverage tools, such as the rare earth choke point, necessitate the US administration to offer concessions [4] Strategic Goals & Interdependence - Both the US and China share a long-term goal of reducing their dependence on each other while maintaining strategic choke points and trade relations [5][6] - Neither side wants a harsh decoupling or sharp economic downturn, as both are incentivized to prevent it [8] - The US seeks to reduce its dependence on China for rare earths, while China aims to decrease its reliance on the US for semiconductors and food [6] Market Impact & Outlook - The market can anticipate a muddling through with temporary truces as both countries pursue long-term goals [8] - Both sides recognize a "mutually assured destruction" scenario due to key choke points, incentivizing them to avoid sharp economic or market disruptions [8]