China-US trade talks progress, markets surge

Beijing makes on Wednesday first big US soybean purchase in 6 months

Photo: EPA US President Donald Trump (R) and Chinese President Xi Jinping

Just over a week after President Donald Trump and Chinese President Xi Jinping reached a temporary truce at the G20 summit, the world's two largest economies finally began showing signs of progress in talks to end their trade war after months of stonewalling.

As Europost reminds, on 1 December, the two presidents decided to end the process of escalating bilateral trade conflict and reach a new trade deal over the next 90 days. As part of the agreement, Trump has pledged to delay its threatened imposition of 25% tariffs on most Chinese imports, giving time for negotiations on long-standing trade disputes between the two countries. Xi, for his part, pledged that China would buy a "very substantial amount of agricultural, energy, industrial, and other products from the US to reduce the trade imbalance between the two countries."

In terms of commitments made, China's Ministry of Commerce announced Tuesday that the two sides are working on agreement's implementation.The announcement came after Chinese Vice Premier Liu He - the country's top trade negotiator - held a phone call with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin and promised to soon deliver on short-term fixes. A day later, as part of their efforts to show their commitment to the talks, Chinese showed the first concrete sign, with state-owned firms making a huge order of soybeans. According to reports, more than 500,000 tons of soybeans worth roughly $180m were bought on Wednesday, representing the first major US soybean purchases in over six months. This comes after Chinese purchases of soybeans had collapsed by more than 90% since the tariffs of President Donald Trump caused Beijing to respond with tariffs on their own on US crops. Moving ahead with some of the agreed-upon steps from the Trump-Xi meeting, China's cabinet has also reported a proposal to lower tariffs on US-made cars to 15% - the rate paid on non-US car imports - from 40%, wiping out levies imposed earlier this year in response to US measures.

The flurry of positive developments in the stand-off tariffs between the world's top economies has provided some early Christmas cheer on trading floors, fueling hopes they can avert an all-out trade war. The surge of the Asian markets was also influenced by the release on bail of Chief Financial Officer at Huawei Meng Wanzhou, whose arrest in Canada last week sparked fury in Beijing and worries about the implementation of the agreed-upon steps at G20.

As China tariffs picked up optimism in the auto market, car companies across Asia also tracked gains in their US counterparts, with Hyundai 5.3 percent higher in Seoul and Mitsubishi - nearly three percent more.

But while encouraging signs seem to show China's dedication to the detente, worrying signs remain that the trade war will not end anytime soon. Most analysts consider it nearly impossible for the two sides to reach an agreement that includes the fundamental changes the US is seeking from China during such a short negotiating window. Even if both sides reach a deal by March’s deadline however the ongoing trade war between them might continue to exist in non-tariff form and also break out into non-trade areas.

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