MS The Weekly Worldview Managed Stability, Manageable

M August 24, 2026 04:01 AM GMT

Global Economic Briefing | North America Morgan Stanley & Co. LLC Idea

Seth B Carpenter Chief Global Economist

Morgan Stanley & Co. International plc (DIFC Branch)

Managed Stability, Manageable? Rajeev Sibal Senior Global Economist

Morgan Stanley & Co. LLC The September summit should reinforce managed competition, Arunima Sinha not deliver a breakthrough. Trade has downshifted, and Global Economist November policy expiries remain an escalation risk. Morgan Stanley MUFG Securities Co., Ltd.

M Chiwoong Lee Principal Global Economist One month from now, on September 24, Presidents Trump and Xi are scheduled to

meet. In years past, a summit between the heads of the two largest economies Morgan Stanley & Co. LLC would have been a key focus for markets. We will look for signs about how the Mayank Phadke, CFA managed strategic competition between the two will evolve. In May, we had the first Economist US presidential visit to China since 2017, and it produced sector-specific commercial agreements, new trade and investment dialogue mechanisms, and a broader Morgan Stanley India Company Private Limited

commitment to continued engagement. The optimist could see concrete outcomes, Priyan Mody Economist the pessimist could see a very limited scope. The larger structural issues were

neither solved nor expected to be solved, as our policy team noted at the time. What the meeting did confirm is something we have argued for some time: stabilization, not normalization, is the more useful framework for understanding this relationship, and both sides continue to see value in keeping competition contained.

The September 24 summit likely matters less for major new announcements and more to see if the framework holds. Clear trade tensions remain, and on November 10 three temporary measures are set to expire simultaneously: the 178-item Section 301 exclusion list, the BIS suspension of the Affiliates Rule, and China's Wave 2 rare earth controls. Moreover, China's April 2025 export licensing regime on seven heavy rare earth elements, meanwhile, has never been suspended and remains fully in force; exports to the US of yttrium, which is used in computer chips, are down by 70% from January 2025 levels. The September Summit should provide some insight as to whether re-escalation is a risk, or if we should expect to continue on the current path.

Exhibit 1: November 10 could be the date that matters more for policy measures than the September 24 summit Measure Authority / Agency Original Enactment Scope / Items Covered Current Status Section 301 U.S. Trade Representative (USTR) / 2018 (Wave 1 tariffs) 178 product categories (Chinese goods) Active exclusion Exclusion List Trade Act of 1974, Section 301 Advanced semiconductor exports from U.S. Announced September 29, BIS Affiliates Rule U.S. Department of Commerce, companies to overseas affiliates/subsidiaries of 2025; effective October Suspended Suspension Bureau of Industry and Security (BIS) Entity List or MEU List companies (≥50% 2025 ownership threshold) Holmium (Ho), Erbium (Er), Thulium (Tm), China Wave 2 Rare Announced October 9, China Ministry of Commerce Europium (Eu), Ytterbium (Yb) + related Earth Export 2025; effective November Suspended (MOFCOM) production equipment + technology know-how Controls 8, 2025 (extraterritorial application)

Source: USTR, Federal Register, MOFCOM, Morgan Stanley Research

The trade data point to a shift in the pattern of US-China trade. US imports from China fell sharply following the 2025 escalation and, while they have stabilized more recently, remain well below earlier levels. At the same time, China’s exports to For important disclosures, refer to the Disclosure Section, the rest of the world remain strong, underscoring the continued importance of located at the end of this report.

Chinese manufactured goods in global trade. How much of this divergence reflects lasting shifts in bilateral trade, changes in sourcing patterns, or trade routed through third countries will take time to determine. For now, the data suggest that direct US-China trade has settled at a lower level, even as China remains deeply integrated into global goods trade.

The…