Trump, Xi Reach Temporary Agreement on Trade

• Trump, Xi Reach Temporary Agreement on Trade

The leaders of two largest economies, President Trump and President Xi, agreed to contain trade war on Saturday with a promise to halt the imposition of additional tariffs for at least three months (90 days) in order to give room for a lasting negotiation.

The new temporary agreement, reached in Argentina during G20 summit, will ease global trade tensions and help halt the introduction of new tariffs, according to Wang Yi, Chinese Foreign Minister who was present at the meeting in Buenos Aires.

“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.

A representative of the White House tagged the meeting “highly successful,” confirming that the U.S. will leave the already imposed 10 per cent tariffs on $200 billion worth of Chinese goods and refrain from raising it to 25 per cent in January as widely stated by the administration.

Sarah Huckabee Sanders, White House Press Secretary, said if the two nations failed to reach agreement on structural reform, the U.S. will increase tariffs on existing goods to 25 per cent from 10 per cent.

She further stated that China agreed to increase its purchases of agricultural and industrial goods to reduce its trade deficit with the United State.

“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.”

The temporary agreement is a positive result for the market and will boost commodity outlook going into the first quarter of 2019. However, uncertainty remains, it is unclear if both nations will reach an accord during the 3 months.

Still, nations like New Zealand, Australia, Japan, etc should experience a temporary improved economic outlook going into the first year of 2019 as China is their largest trading partner.

Also, with the Fed likely to slow down on rate increase going into the new year, emerging economies should attract new funds.

“Neither side got their maximum demands and it’s not the first time in U.S.-China relations that both sides claim victory,” said Michael Pillsbury, a senior fellow at the Hudson Institute and a defense official under presidents including Ronald Reagan and George W. Bush. “Both sides avoided the worst-case scenario.”