US–China ties stabilise, but economic risks are building

Recent talks between the United States and China have helped stabilise relations, but only at the margins, with deeper geopolitical tensions and economic risks continuing to build, Commonwealth Bank economists say.

Trade truce holds, but rivalry continues

CBA Senior Geoeconomics Analyst Madison Cartwright said outcomes from the latest US-China summit were limited, focused on preserving stability rather than delivering breakthroughs.

"They certainly weren't historic," he said.

"These were very small scale trade arrangements… about maintaining that trade truce."

Speaking on the latest episode of the CommBank View: Economics & Markets podcast, Cartwright said that while agreements were reached on some exports, the broader relationship remains largely unchanged.

"We haven't got much change in the trade relationship." he said.

More complex issues, including critical minerals - where China dominates the global market - were left unresolved.

Taiwan remains a central tension

Taiwan continues to sit at the centre of the US-China relationship, with recent rhetoric reflecting long-standing positions rather than escalation.

"It was a very clear reminder… that Taiwan remains the centre of their bilateral relations with the United States."

While near-term sentiment has steadied, the underlying dynamic has not shifted. "This is fairly standard dialogue that we've come to expect from them," Cartwright said.

Ceasefire risks grow as Iran tensions linger

Beyond US-China relations, conflict in the Middle East remains a key source of uncertainty.

"We do not believe that the ceasefire is sustainable, ultimately," Cartwright said. "The dynamics… underpinning it will cause instability and it will eventually make the ceasefire collapse."

While there are signs of movement in negotiations, "the agreement can only be reached if the United States makes some sort of concessions to Iran", he said.

"The problem is the progress is very slow."

As talks continue, both sides are trying to strengthen their bargaining positions, raising the risk of renewed disruption.

"Both sides are losing patience… and they're trying to do things to increase their leverage in negotiations," he said.

China is expected to remain engaged, but its role is limited.

"It's not going to come to the rescue and it's not going to solve this problem for the United States," he said.