Stocks surge peak on US-China deal
● President Donald Trump signed off on a phase-one trade deal with China, averting today’s planned introduction of a new wave of US tariffs on about $160bn (R2.3-trillion) of consumer goods from China, according to people familiar with the matter.
The deal presented to Trump by advisers this week included a promise by the Chinese to buy more US agricultural goods, according to the people. Officials also discussed possible reductions of existing duties on Chinese products. The terms have been agreed but the legal text has not yet been finalised, the people said. A White House spokesperson declined to comment.
Global stocks hit a record high for the first time since early 2018 and bond yields climbed on optimism over trade.
On Thursday, Trump tweeted that the US and China were “VERY close” to signing a “BIG” trade deal, also sending equities higher. “They want it, and so do we!” he tweeted five minutes after equity markets opened.
The Trump administration has reached out to allies on Capitol Hill and in the business community to issue statements of support once the announcement is made, people said.
Before meeting his trade advisers, Trump engaged with members of the Business Roundtable, which represents some of the largest US companies.
Trump has changed his mind on deals with China before. Negotiators have been working on the phase-one deal for months after the president announced in October that the two nations had reached an agreement that could be put on paper within weeks.
The US has added a 25% duty on about $250bn of Chinese products and a 15% levy on another $110bn of its imports over the course of a 20-month trade war. Discussions now are focused on reducing those rates by as much as half.
In addition to a significant increase in Chinese agricultural purchases in exchange for tariff relief, officials have also said a phase-one pact would include Chinese commitments to do more to stop intellectual-property theft and an agreement by both sides not to manipulate their currencies.
Put off for later discussions are knotty issues such as US complaints over vast subsidies ranging from cheap electricity to low-cost loans that China has used to build its industrial might.
The new duties, scheduled to take effect today unless the US administration says otherwise, would hit consumer goods from China, including smartphones and toys. Even amid the positive signs on trade, Chinese foreign minister Wang Yi highlighted the other confrontations between the two sides.
On Friday in Beijing, Wang said US actions had “severely damaged the hardearned basis for mutual trust” and left the relationship in its “most complex” state since the two sides established ties four decades ago.
Before today, Trump’s advisers had sent conflicting signals and emphasised that he hadn’t made up his mind on the next steps.
The decisions facing Trump over a trade deal highlight one dilemma he confronts going into the 2020 election: whether to bet on an escalation of hostilities with China and the tariffs he is so fond of, or to follow the advice of more market-oriented advisers and business leaders who argue that a pause in the escalation would help a slowing US economy bounce back in an election year.
Chinese commit to do more to stop intellectual property theft