Global shares jump on US-China trade 'truce'

Oscar PerryDec 06, 2018

In a tweet Sunday night, US President Donald Trump said China has "agreed" to reduce and eventually eliminate its 40-percent tariff on US-made vehicles.

But now comes the hard work after a trade war truce was hammered out between United States President Donald Trump and China's head of state Xi Jinping at a dinner in Buenos Aires at the weekend.

Trump expressed optimism that, based on his and Xi's friendship, the two sides would be able to hammer out an agreement that would prevent USA tariffs on Chinese imports from a scheduled increase in January.

But the language used in the Trump administration's announcement of the deal was very different to that in Chinese government statements, especially on Beijing's promises to buy more USA goods and the possibility of removing existing tariffs.

The two sides also agreed to start discussions on other contentious issues, including intellectual property protection, non-tariff trade barriers and cyber theft.

Left out of Chinese media statements is the USA claim that a tariff deal is conditioned on the two countries resolving key issues within 90 days.

The statement added that if the parties are unable to reach an agreement at the end of the 90-day period, the tariffs will be raised from 10 percent to 25 percent.

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China had previously offered to increase its purchases of U.S. products, only to have Mr Trump reject the deal.

The truce, although temporary, is a positive step towards a resolution to the US-China trade war.

The U.S. delegation included Secretary of State Mike Pompeo, Treasury Secretary Steven Mnuchin, Chief of Staff John Kelly, U.S. Trade Representative Robert Lighthizer, national security adviser John Bolton, assistant to the president and senior adviser Jared Kushner, assistant to the president for trade and manufacturing policy Peter Navarro, and assistant to the president for economic policy Larry Kudlow.

On Saturday, Trump and Chinese President Xi Jinping agreed to hold off on future tariffs until March 1.

China has sought to bolster relations with other countries and forge new economic partnerships this year, as its relationship with the U.S. faces new strains over trade. However, the losers of the 10% trade tariff imposed on Chinese goods are American farmers who have been hurt by reduced Chinese imports of soybeans and other products. China has also agreed to buy more American farm goods, industrial goods, and energy, and to target fentanyl, a drug that has caused a large number of overdoses in America. For example, the Trump administration's concerns about China's alleged theft of US intellectual property remain in place and Beijing's broader push for indigenous advances in its hi-tech sector under the aegis of the "Made in China 2025" initiative have yet to be addressed. Trump left immediately to board Air Force One for Washington, having spent two days attending the summit of G20 countries.

Treasury Secretary Steven Mnuchin said on CNBC the United States and Chinese had "very specific discussions" in Buenos Aires Saturday evening on steps to defuse their conflict, which involves hundreds of billions in bilateral trade and had roiled world markets for months. It has involved both countries imposing tariffs on billions of dollars' worth of goods, with the U.S. hitting Chinese goods with $250bn of tariffs since July, and China retaliating by imposing $110bn worth of duties on United States products. China responded by imposing its own round of tariffs.

According to Wang, the two presidents "reached important common understandings and the meeting certainly has charted the course for China-U.S. relations in the some time to come".

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