Published On: Mon, Dec 3rd, 2018

Asia Markets Jump After Us And China Agree To Trade Truce

Asian markets jumped after the presidents of China and the US reached a temporary truce in their trade war.

Asia Markets Jump

At the G20 summit, Donald Trump and Xi Jinping agreed to halt new trade tariffs for 90 days to allow for talks.

An escalating trade war between the world’s two largest economies has weighed on markets generally.

The US and China have imposed tariffs on billions of dollars worth of one another’s goods, posing risks to global trade and the world economy.

“Many people suspected that there may be a more disastrous outcome, this is definitely a relief.”

The US and China have been embroiled in a trade war this year which has seen the US hit China with tariffs on $250bn (£195.9bn) worth of goods since July, and China retaliate with duties on some $110bn of US goods over the same period.

Failure to strike a deal would have seen tariffs on $200bn worth of Chinese goods rise from 10% to 25% at the start of next year, and would have opened the way for tariffs on additional Chinese goods.

What has been agreed?

In a statement, the White House said US tariffs on Chinese goods will remain unchanged for 90 days, but added: “If at the end of this period of time, the parties are unable to reach an agreement, the 10 percent tariffs will be raised to 25 percent.”

Chinese Foreign Minister Wang Yi told reporters after the talks that “the principal agreement has effectively prevented further expansion of economic friction between the two countries”.

He hailed “new space for win-win co-operation”, while Chinese state TV said negotiations would continue.

Are tariffs still in place?

Yes. The truce prevents raising tariffs as planned on $200bn worth of Chinese goods.

But it does not remove tariffs that apply to a total of $250bn of Chinese goods targeted since July.

The truce also does not affect the existing duties China has imposed on $110bn of US goods in a tit for tat retaliation.

Will this resolve the dispute?

While the result of the G20 meeting was better than expected, it is unclear how the two countries will manage to resolve the underlying differences behind the conflict.

“There should be no wishful thinking that the truce would end the trade war between the world’s two largest economies,” DBS strategist Philip Wee wrote in a research note.

“Whether we will see further de-escalation or whether it is temporary reprieve continues to be very much up to a political decision in Washington DC – that will continue to make this uncertain,” Louis Kuijs, head of Asia economics at Oxford Economics said.