Trading room – Mon 3 Dec 2018
It was reported that US president Donald Trump and China president Xi Jinping had agreed to a 90-day trade truce to allow for additional negotiations to address US concerns after China agreed to buy a “very substantial” amount of American exports, the White House said in a statement released late on Saturday.
It said that Chinese officials agreed that the country would buy more US products in an effort to reduce the large bilateral trade imbalance.
Meanwhile, Trump agreed to postpone for 90 days a scheduled increase in tariffs on US$200 billion in Chinese imports while talks to address American concerns about China’s trade practices take place.
If there is no deal at the end of the 90-day grace period, the US will increase the tariffs on the US$200 billion of goods from 10 per cent to 25 per cent. The negotiations, and therefore the 90-day timeline, start immediately.
“President Trump and President Xi have agreed to immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services, and agriculture,” according to the White House statement.
“Both parties agree that they will endeavor to have this transaction completed within the next 90 days. If at the end of this period of time, the parties are unable to reach an agreement, the 10 per cent tariffs will be raised to 25 per cent.”
However, the exact value of the purchases has not yet been agreed, the White House said.
Chinese Foreign Minister Wang Yi was reported as telling reporters that China had agreed to import more US goods “according to its domestic market and people’s demands”, which will include “buying more products from the US to gradually address the trade imbalance”.
Wang also said that China would gradually solve the “legitimate concerns” of the US side, but did not elaborate.
Wang also said the two sides would continue negotiations with the goal of “removing of all additional tariffs”.
Dinner discussions about de-escalating tensions between the world’s two largest economies lasted an hour longer than expected.
Both sides appeared satisfied at the end of the gathering, and applause was heard in the room as the dinner drew a close.
The satisfactory though inconclusive resolution is likely to provide some cheers to the local and global market, which has been plagued by several issues such as the two countries trade war, rising US interest rate, a strong dollar, a slowing global economy, weak commodity prices such as crude oil and in other hard and soft commodities and frayed nerves in the financial markets.
It was reported that the Organisation of Economic Cooperation and Development (OECD) in Paris sees both the Chinese and US economies slowing at roughly the same rate over the coming two years as global conditions deteriorate, and as the growth rate of the world economy slows from a projected 3.7 per cent this year to 3.5 per cent in 2019 and 2020.
OECD is projecting China’s economic growth to slow from 6.6 per cent this year to 6.3 per cent in 2019, and 6 per cent in 2020. Meanwhile, the OECD also said that over the same period, the US economic growth rate will slow from 2.9 per cent in 2018 to 2.7 per cent in 2019 and to 2.1 per cent in 2020.
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