The latest episode in the never-ending saga of U.S.-China economic relations has just wrapped up in London. After two days of what I'm sure were thrilling discussions (cue the diplomatic small talk and uncomfortable silences), Treasury Secretary Janet Yellen and Chinese Vice Premier He Lifeng emerged with... wait for it... a "framework to implement the Geneva trade consensus."
If that sounds like bureaucratic alphabet soup, that's because it is.
What we're witnessing here isn't so much progress as it is the careful choreography of diplomatic inaction. Having covered these bilateral talks since the Trump tariff era, I've seen this dance before—officials meet, they nod gravely at each other's concerns, then announce some vague arrangement that commits nobody to anything specific.
The "Geneva consensus" they're now "implementing" was itself just a fuzzy agreement to address industrial capacity concerns. Now we have a framework for that non-specific agreement. It's like promising to eventually consider possibly thinking about maybe cleaning your garage someday.
But here's the thing—markets don't hate it.
Wall Street doesn't actually need real breakthroughs in U.S.-China relations. What investors crave is the absence of new problems. No news is good news, as they say. As long as officials keep the relationship in this diplomatic purgatory—not improving but not collapsing—markets can function with the devil they know.
"These frameworks serve a purpose beyond their actual content," explained Dr. Margaret Chen, whom I spoke with yesterday at the Peterson Institute. "They create space for both sides to avoid escalation without requiring painful concessions."
The backdrop matters tremendously. The U.S. continues beating the drum about Chinese industrial overcapacity—particularly in EVs, solar panels, and batteries. China, meanwhile, remains deeply unhappy about American semiconductor export controls. Neither side appears willing to budge on substance, but both desperately want to avoid a full-blown trade war ahead of November's presidential election.
Look, we've been here before. Remember the "Phase One" trade deal? Or the "strategic economic dialogue"? Or any number of other diplomatic contraptions designed to manage this relationship? They all follow the same pattern: announce a process rather than a outcome, claim victory, rinse, repeat.
What's fascinating (at least to trade policy nerds like myself) is how differently these talks get framed to domestic audiences. In Washington, it's all about protecting American workers from "unfair competition." In Beijing, it's defending legitimate industrial policy against foreign interference. Same meeting, completely different planets.
The markets' collective shrug tells the real story. Shanghai barely registered a reaction. U.S. indices didn't exactly pop champagne either. It's almost as if—and I know this sounds crazy—investors have learned not to take these diplomatic pronouncements at face value!
I've developed what I call the "Diplomatic Opacity Discount" theory. When officials emerge with vague frameworks rather than specific commitments, markets apply a 70-90% discount to whatever theoretical value the announcement might have had. It's why markets often move more on rumors of a deal than on the actual announced framework.
Where does this leave us?
Well... treading water. Not drowning, but certainly not swimming toward shore either. The cycle will continue—more meetings, more frameworks, more mechanisms for implementing previous frameworks.
For now, both sides can claim they're making progress while doing almost nothing. It's the diplomatic equivalent of updating your relationship status to "it's complicated."
At least they've agreed on a framework. Though someone should probably tell them you need a picture to go with it.
