A ceasefire in the trade war is as good as it gets at the G20. It is good news for financial markets and the global economy and it paves the way for a real deal in 2019, which removes all tariffs imposed and leads to a further opening of the Chinese market.
Trump's need for a deal with China and a strong US economy when he goes into the 2020 election campaign increases the chance of an end to the trade war in 2019.
While we should expect bumps in the road, we continue to look for a deal next year and odds are rising it could come as early as the end of Q1.
However, the long-term rivalry between US and China is here to stay. It is set to change from trade war to tech war and rivalry on the global scene.
The facts and initial responses
A statement released by the White House after the dinner called the meeting 'highly successful' and listed the following key features of the agreement.
- A 90-day ceasefire with no increases in tariffs or new tariffs imposed. If no agreement is reached after this period, the 10% tariff rate on USD200bn worth of Chinese goods will be raised to 25%.
- China agreeing to buy a not yet specified, but very significant, amount of US goods within agriculture, energy and industry products.
- Immediately beginning negotiations on 'structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusion and cyber theft, services and agriculture'.
In addition, Xi stated he was open to approving the previously unapproved deal between the US mobile technology company Qualcomm (NASDAQ:QCOM) and Dutch NXP (a semiconductor company). Xi also agreed to designate Fentanyl as a Controlled Substance, meaning that people selling Fentanyl to the US will be subject to China's maximum penalty under the law.
Trump was quoted saying: 'This was an amazing and productive meeting with unlimited possibilities for both the United States and China'.
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