Asia Business Channel

China – U.S. Trade War - Trump, Xi declare truce for 90-days to negotiate further

President Donald Trump and Chinese President Xi Jinping agreed on Saturday to a temporary, 90-day trade ceasefire, to allow time for more negotiations. The move means that U.S. tariffs on $200 billion worth of goods will stay at the current rate of 10% and will not be raised to 25% on January 1, 2019 as Trump had threatened.

According to a statement from the White House, as part of the deal, China agreed to buy "a very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries. Although precise quantities still need to be worked out, China will "start purchasing agricultural product from our farmers immediately."

This could potentially be welcome news for U.S. agricultural producers, who have borne the brunt of China's retaliation against Trump's tariffs. However, China has not specified which products it will buy and the White House could not offer any information on this.

The report of the 90-day trade truce, followed a 2.5 hour dinner meeting between China’s President, Xi Jinping and U.S. President Donald Trump and their top aides following the conclusion of the annual G-20 leaders meeting that was held in Argentina.

In a statement to the press, President Trump said: “This was an amazing and productive meeting with unlimited possibilities for both the United States and China. It is my great honor to be working with President Xi.”

The Dow Future surged more than 400 points on news of the temporary truce cut economists and media analysts noted that while there is a surge in stock prices, there is an expectation that stocks will fall again unless concrete action is taken to create a permanent agreement between the countries and the reduction of tariffs by both countries.

A permanent deal between the two countries may be impossible within the self-imposed 90-day truce since there are a number of issues that the countries would have to settle with this period. The issues that the U.S wants covered include agriculture, cyber-intrusions, cyber-theft, forced technology transfer, intellectual property protection, non-tariff barriers and services. Many of these issues have been discussed by China and the U.S. for years and experts don’t believe full agreements on these issues can be completed with 90-days.

Manufacturers in China breathed a sigh of relief at the new of the truce since many companies are considering whether they should move all or parts of their factory operations to countries in Southeast Asia that are not impacted by tariffs between China and the U.S. According to Chinese media reports, many Chinese companies will be forced to move operations if the tariffs continue, but for now, most factories will stay in China as they are making contingency plans to move factories next year if warranted.

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