China and US Agree 90-Day Pause to Trade War
In a significant move to ease tensions between the world’s two largest economies, China and the US have agreed to a 90-day pause to their deepening trade war. According to reports from The Guardian, the US treasury secretary, Steven Mnuchin, announced that reciprocal tariffs would be lowered by 1.15 percentage points, following talks in Geneva.
Speaking to the media, Mnuchin said both sides had shown "great respect" in the negotiations, adding that "the consensus from both delegations this weekend was neither side wants a decoupling." This development comes as a welcome respite to the escalating trade tensions that have threatened to upend the global economy.
The 90-day lowering of tariffs applies to the duties announced by Donald Trump on April 2, which ultimately escalated to 25% on most Chinese imports, with Beijing responding with equivalent measures. China also imposed non-tariff measures, such as restricting the export of critical minerals that are essential to US manufacturing of hi-tech goods.
The Guardian reports that the US trade representative, Robert Lighthizer, said China’s retaliation had been disproportionate and amounted to an effective embargo on trade between the world’s two biggest economies. Under the agreement, Chinese duties on US goods will be lowered to 10%, while the US tax on Chinese goods will be lowered to 30%.
A spokesperson for China’s ministry of commerce said: "This move meets the expectations of producers and consumers in both countries, as well as the interests of both nations and the common interest of the world. We hope that the US side will, based on this meeting, continue to move forward in the same direction with China, completely correct the erroneous practice of unilateral tariff hikes, and continually strengthen mutually beneficial cooperation."
The agreement has been met with optimism, with China’s yuan jumping to a six-month high on the signal that the trade war would be paused. According to some estimates, up to 16m jobs were at risk in China, while the US faced rising inflation and empty shelves thanks to dizzying tariffs on the biggest supplier of US goods.
The Guardian quotes US treasury secretary, Steven Mnuchin, as saying he was impressed by the level of Chinese engagement on the fentanyl problem during the talks in Switzerland. "For the first time the Chinese side understood the magnitude of what is happening in the US," Mnuchin said.
A joint statement published by the US and China on Monday said both sides would "continue to advance related work in a spirit of mutual openness, continuous communication, cooperation and mutual respect." Analysts have welcomed the agreement, with William Xin, the chair of the hedge fund Spring Mountain Pu Jiang Investment Management, telling Reuters: "The result far exceeds market expectations. Previously, the hope was just that the two sides can sit down to talk, and the market had been very fragile. Now, there’s more certainty. Both China stocks and the yuan will be in an upswing for a while."
The agreement has also been met with a positive response from stock markets, with Germany’s Dax index jumping by nearly 1%, and France’s Cac 40 index rising by 1.3%. Shares in the Danish shipping group Maersk rose 12%. Brent crude rose almost 3% at $65.75 a barrel, while the dollar index, which measures the greenback against a basket of currencies, jumped by 1.2%.
Analysts at the Dutch bank ING lifted their forecast for China’s growth this year, predicting a jump in exports from China to the US, reverting to forecasting 4.7% growth in the Chinese economy this year. As The Guardian reports, Wang Wen, the head of the Chongyang Institute for Financial Studies at Renmin University in Beijing, said: "This is an unexpected achievement in Sino-US tariff negotiations." However, Wang also urged caution, as he said the agreement "does not represent the resolution of the structural contradictions between China and the United States, nor does it mean that there will be no friction and serious differences between China and the United States in the future."
Source: www.theguardian.com
