Stocks jump after USA and China cool trade tensions

Frederick Owens
December 5, 2018

President Trump is touting great progress on trade talks with China, following his meeting with the Chinese president at the G20 summit.

USA president Donald Trump took to Twitter to make the announcement, suggesting that the current tariff is at 40 percent.

China has agreed to "reduce and remove" the 40-percent tariff it slaps on new cars imported from the United States, president Donald Trump wrote in a Twitter post.

The lack of specificity is not limited to the promise that China will purchase more agricultural goods.

Trump last week ordered a separate review of China's 40 per cent tariff on auto imports from the USA, 25 percentage points of which are the result of Chinese retaliation against Trump's own tariffs on imports from China. Trump agreed to delay the scheduled USA tariff increase for 90 days while the two sides negotiate over the administration's technology-related complaints.

While the Trump administration emphasized trade issues such as a 90-day moratorium on raising tariffs and Xi's concession to buy "very substantial" amounts of US goods, China focused on diplomacy, regional issues and an agreement to try to quickly resolve their differences.

Trump imposed a tariff hike of 25 percent on $50 billion of Chinese imports in July over complaints Beijing steals or pressures companies to hand over technology.

Both sides gained from hitting the pause button, with Trump securing a Chinese pledge to import more United States goods and Xi staving off the further pressure that higher tariffs would place on his country's slowing economy.

On the non-trade issues, Beijing was more open, announcing that China will tighten supervision of Fentanyl and review rules on the drug.

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If the two sides can not reach agreement over these matters within the next 90 days, the United States will raise tariffs.

"(Both leaders) instructed the economic teams of both sides to step up negotiations toward the removal of all additional tariffs and reach a concrete deal that is mutually beneficial and win-win", Xinhua said.

At their dinner meeting in Buenos Aires Saturday, the two leaders agreed to suspend any new tariffs and give negotiators 90 days to strike a deal, sending stock markets soaring. "I don't see an easy path within the 90-day window to resolve the differences they have".

"Neither side got their maximum demands and it's not the first time in U.S".

China's foreign ministry declined to confirm Trump's assertion on Monday, instead saying: "On December 1 President Xi and President Trump reached an important consensus on trade issues". "China relationship for the time being. the "pause" prolongs the period of uncertainty around the eventual structure of trade relations between the two countries", Goldman Sachs analysts said in a report.

"This is probably the best case scenario that markets were hoping for", Rakuten Securities Australia, a brokerage based in Sydney, stated in a note.

"But I will just tell you as an involved participant we expect those tariffs to go to zero", Kudlow added in a conference call with reporters.

Trump said he and Xi "are the only two people that can bring about massive and very positive change, on trade and far beyond, between our two great Nations". Mr. Trump had warned that a disappointing outcome could prompt more USA tariffs.

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