Presidents Trump and XI have agreed to call a truce in the trade dispute between the world’s two largest economies. Neither side will impose new tariffs for 90 days as they attempt to negotiate a lasting agreement.
Bloomberg reports the following points:
- The truce was announced following a much publicized dinner Saturday evening between Trump and Xi and their staffs after the Group of 20 summit in Buenos Aries, Argentina. Chinese Foreign Minister Wang Yi told reporters hours later.
- “Both sides believe that the principled agreement reached between the two presidents has effectively prevented the further expansion of economic frictions between the two countries,” he said
- The White House said the meeting was “highly successful.” The current 10% tariff on $200 billion of Chinese goods will remain but the US has agreed not to increase it to 25% on January 1st nor to add further duties for the agreement period as had been threatened by the Trump administration. In return the Americans want immediate talks on their biggest complaints about intellectual property theft, the forced technology transfer to legally mandated Chinese partners, and numerous non-tariff trade barriers.
- White House Press Secretary Sarah Huckabee issued a statement saying that if after 90 days, there is no progress on structural reform, the U.S. will raise the 10% tariff to 25%. China also agreed to increase its purchases of agricultural and industrial goods to reduce its trade imbalance with the U.S.
- The meeting ran two hours longer than scheduled.
- Trump and Xi ate local specialties, including grilled sirloin with red onions, goat ricotta, and dates. The first course was a seasonal vegetable salad with a basil mayonnaise dressing. For dessert, they were served caramel rolled pancakes with crispy chocolate and fresh cream, according to the White House.
- “It’s an incredible deal. It goes down, certainly — if it happens, it goes down as one of the largest deals ever made,” Trump told reporters aboard Air Force One as he returned from Argentina. “China right now has major trade barriers — they’re major tariffs — and also major non-tariff barriers, which are brutal. China will be getting rid of many of them,” reported Bloomberg.
The agreement while widely anticipated, will come as good news to equity markets which have been battered by global trade concerns among other worries. It will probably not be enough to ignite a full-bore stock rally, but it should improve sentiment by removing, at least temporarily, the threat of a collapse in dialogue between the two nations. It may also relieve some upward pressure on the US Dollar as a safe haven.
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