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Markets: Relief from the US and China’s trade agreement – Danske Bank

Analysts at Danske Bank suggest that markets in Asia were buoyed by the trade agreement between the US and China at this weekend’s G20 meeting as the agreement between the US and China provided a 90-day truce allowing for negotiations on a permanent trade deal.

Key Quotes

“The truce prevented a further increase in tariffs or new tariffs imposed from the US side. However, the US threatened that if no agreement is reached after this period, the 10% tariff rate on USD200bn worth of Chinese goods will be raised to 25%.”

“In order to reach this agreement, China agreed to buy a not yet specified but very significant amount of US goods within agriculture, energy and industry products plus the two sides will begin to immediately negotiate ‘structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusion and cyber theft, services and agriculture’. According to a tweet from President Trump over the weekend, the Chinese side had also agreed to ‘reduce and remove’ tariffs on American cars from 40% currently.”

“In our view, the deal is good news for financial markets and the global economy. It paves the way for a real deal in 2019 that removes all tariffs imposed and leads to more opening of the Chinese market.”

“The G20 meeting also provided relief for the oil price, as Russia and Saudi Arabia agreed to extend into 2019 their deal to manage the oil market, known as OPEC+, although Moscow and Riyadh have yet to confirm any fresh output cuts. The announcement opens the door for a deal at the OPEC meeting on Thursday, 6 December. The oil price is up 6% this morning on the news with Brent trading slightly above USD62 per barrel.”

 

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