As the Street expected, the China trade war may be winding down.
What Happened
President Donald Trump tweeted Sunday that he would delay a tariff hike scheduled for March 2 to honor “substantial progress” in trade talks around intellectual property, currency and agriculture.
China corroborated this progress and cited steps toward an official agreement.
Why It’s Important
The U.S. tariff increase — which would raise rates from 10 percent to 25 percent on $200 billion of Chinese imports — was originally set to take effect Jan. 1, but Trump negotiated a 90-day truce to work out a deal. The extended truce, for which Trump offered no new deadline, delays a fourth round of back-and-forth tariff jabs.
“If extending the deadline leads the two governments to secure a sustaining bilateral deal that addresses American concerns about market access and structural reforms, then it will be worth it,” Myron Brilliant, executive vice president at the U.S. Chamber of Commerce, told the Wall Street Journal. “Business wants a comprehensive deal that will reduce tensions and eliminate existing punitive tariffs.”
Trump offered few details on the nature of the progress, but Beijing recently offered to loosen restrictions on U.S. financial services and automotive companies; increase U.S. agriculture and energy purchases; and bolster protections for intellectual property. China remained intransigent on other policies, including the issuance of government subsidies to state-owned firms.
“There is still a yawning gap between the two sides on major issues due to U.S. lack of trust in China’s commitments on structural issues and China’s unwillingness to make any fundamental changes to its industrial and economic strategies,” Cornell University China expert Eswar Prasad told the WSJ.
Still, the market seems to expect a near-term positive ending. Shanghai stocks soared 5.6 percent Monday for their largest daily percentage gain in over three years, and Dow futures popped more than 150 points.
What’s Next
So long as progress continues, Trump will plan a summit with China President Xi Jinping at Mar-a-Lago to strike an agreement and conclude a yearlong trade war.
The market awaits details on compliance and accountability measures, complaint evaluation and enforcement of penalties.
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Chip Makers Get A Lift As Tariff Talks With China Looking More Positive
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