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Donald Trump was sworn into office on Monday, kicking off his second term as the 47th President of the United States. There’s a lot of optimism from the business community at the moment, and a lot of the focus is, understandably, on what’s happening in the U.S.

But over the past couple of weeks, I’ve been watching the price action in another important market. In fact, it’s the market that’s home to the second largest economy in the world.

If you guessed China, you’d be correct.

My research shows Trump’s policies might be the best thing to happen to Chinese stocks since 2008. You read that right.

So today, I want to show you why I think a Trump presidency could be very bullish for Chinese stocks, and why we shouldn’t forget that it’s a global market out there…

The Technological Arms Race for the Future

Over the past couple of years, we’ve heard mostly negative reports about the state of the Chinese economy. There have been numerous stimulus efforts from both the Chinese government and the People’s Bank of China on behalf of its economy.

But if you zoom out, take a look at the long-term chart of the iShares China Large-Cap ETF (FXI) below, you’ll see that it never fully recovered from the global financial crisis back in 2008 and 2009.

Notice the October 2008 high has never been exceeded.

Now, those that have traded alongside me during my time here at TheoTrade know that I love to buy strength. And when it comes to China, it’s the emerging strength there that has my attention. 

In fact, in 2024, FXI actually outperformed the SPDR S&P 500 ETF (SPY) - if you shared that factoid with most people, I think they’d be surprised.

Many might think that Trump’s policies and rhetoric against China would hurt their market’s performance due to tariffs, sanctions, or diplomatic tensions. But I’m here to show you how domestic actions in the U.S. could actually help the Chinese market. Let me explain.

There are a few factors under consideration here, but I’ll just keep it surface level on each point. 

The first one has to do with inflation in the United States. This may sound silly at first, but as long as inflation remains contained, and the Trump administration has a, “drill baby, drill,” policy, it’s going to help keep oil prices and interest rates down.

This helps China because they are the largest oil importer in the world. On top of that, high interest rates in the U.S. hurts China because it incentivizes investors to park money in the U.S. markets versus Chinese markets.

If you don’t believe me, take a look at how the Chinese market spiked just a few days before the Fed started cutting interest rates in September 2024.

Then there is the trade component. China is a major exporter of goods, and the U.S. is a major importer of goods. I don’t think China wants to get hit with terrible tariffs, so new trade agreements, especially surrounding semiconductors, are likely to be forged.

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