Trump's Xi Remark Sparks Fears Over US-China Tensions and Taiwan Relations

US President Donald Trump asked Chinese President Xi Jinping if Beijing would be interested in buying American weapons, a move that has raised questions about US-China policy and Washington's military support for Taiwan. According to US Ambassador to China David Perdue, Trump made the inquiry at some point during his meeting with Xi in September 2023. However, there are no plans to sell weapons to China, as the US currently classifies China as an arms-embargoed country.

The proposed sale of a $14 billion US weapons package to Taiwan is also being delayed, which has added to tensions between the US and China over Taiwan. The Taiwan Relations Act provides the framework for Washington to make defensive equipment available to Taiwan to maintain its self-defense capability. If restrictions on arms sales to China were lifted, major defense contractors such as Lockheed Martin, RTX, General Dynamics, Northrop Grumman, and Boeing could benefit.

However, there are risks associated with selling weapons to China, including the possibility of sanctions being imposed by Beijing. In fact, RTX previously faced sanctions from China over arms sales to Taiwan. The bigger near-term financial issue may be Taiwan, as any decision to approve, delay, or scale back more purchases could affect future order pipelines for US defense suppliers.