Xi Gains Leverage Before Trump Summit | The China Show 2/23/2026

The Supreme Court ruling limits Trump's ability to impose arbitrary reciprocal tariffs, capping the new global tariff at 15% under Section 122. Asian markets (Korea +1.5%, Taiwan up) are rallying. This removes the "tail risk" of 50-100% tariffs on Asian exporters. The 15% rate is viewed as manageable and provides certainty. Furthermore, demand for AI chips remains insatiable, and these companies have pricing power to pass on the 15% cost. LONG Asian Tech Hardware. The relief rally combined with fundamental AI demand makes this the top trade. Trump finds a new legal avenue for higher tariffs after the 150-day Section 122 period expires. UUP / USD - SHORT Speaker: Mark Cranfield / Jack McIntyre Thesis: The US Dollar is trading softer following the Supreme Court decision. Jack McIntyre notes Brandywine is short USD and expects currency to be a primary return driver. The SCOTUS ruling strips the US of its "tariff cudgel," reducing US geopolitical leverage. Combined with a potential pivot to "balance of payments" tariffs (which implies the US has a deficit problem), the narrative shifts away from US exceptionalism, prompting capital flight to cheaper jurisdictions. SHORT USD. A global recession triggers a "flight to safety" back into the Dollar. GLD / SLV - LONG Speaker: Mark Cranfield Thesis: Gold is up ~2% and Silver is rallying. Traders have cut net long positions significantly in recent weeks, cleaning up positioning. The combination of a weaker US Dollar (due to the tariff ruling) and lingering geopolitical risks (Iran tensions, though secondary to tariffs) creates a perfect storm for precious metals. The "pain threshold" for tariffs is lower, meaning the Fed may not need to be as hawkish to combat tariff-induced inflation. LONG Precious Metals. A sudden spike in US real yields or a resolution to geopolitical tensions. IGV / SOFTWARE SECTOR - AVOID / SHORT Speaker: Helen Zhu Thesis: Zhu states the "AI scare trade" (selling software) is "totally justified." Companies that traded at high Price-to-Sales multiples are seeing their "terminal value" questioned. AI is disrupting the "moats" of legacy SaaS and business services. If AI can replace 80% of a service cheaper and faster, the visibility of 3-5 year software contracts evaporates. Multiples must reset lower to reflect this existential risk. AVOID / SHORT High-Multiple Software. AI adoption slows down, proving legacy software moats are more durable than expected. LATIN AMERICAN ASSETS / EMERGING MARKETS - LONG Speaker: Jack McIntyre Thesis: Brandywine Global is allocating to Latin America, citing attractive real yields and better balance sheets compared to the US. With the US Dollar weakening and US Treasuries facing supply/inflation headwinds from tariffs, capital is seeking yield in regions with positive real rates. Latin America benefits from the "weak dollar" trend. LONG Latin American Debt/Equities. A resurgence of the US Dollar or political instability in LatAm. TLT / US TREASURIES - AVOID Speaker: Jack McIntyre Thesis: McIntyre has cut net US Treasury holdings, exiting 10-year positions. He sees yields moving to the 4.5% range. Tariffs (even at 15%) are inflationary and reduce real growth, creating a stagflationary backdrop. Additionally, "bond vigilantes" may react negatively to the reduced revenue/efficiency of the US economy under a protectionist regime. AVOID US Duration. A severe US recession prompts the Fed to cut rates aggressively, sending yields lower. HONG KONG / CHINA PROPERTY SECTOR - LONG Speaker: Yvonne Man / David Ingles Thesis: The Hang Seng Property Index has seen 9 straight weeks of gains (longest run since 2003). JP Morgan upgraded the sector to overweight. There is "FOMO sentiment" from mainland Chinese buyers diversifying wealth into Hong Kong assets. The removal of extreme tariff risks (fentanyl-related tariffs gone, replaced by flat 15%) improves the macro outlook for Chinese wealth preservation. LONG Hong Kong Developers/REITs. Regulatory crackdowns from Beijing or a resurgence of US-China tensions post-summit. TEXTILES & LEATHER / CONSUMER DISCRETIONARY (China Exporters) - LONG Speaker: Yvonne Man / Matt Priest Thesis: "Shadow International" (Shenzhou International) is up 4%. Matt Priest notes that a flat 15% tariff is better than the chaos of reciprocal levies (which were 20-100%). The market feared a trade war escalation with tariffs hitting 60-100%. A capped 15% rate is a "relief" for exporters who have already diversified supply chains or have pricing power. The uncertainty premium is being priced out. LONG Major Asian Exporters. Trump uses other tools (Section 301/232) to target specific sectors after the 150-day window.