US, China Agree to 90-Day Trade Truce
While the US and China have not yet reached a trade deal, they have come to terms on what some might consider the next best thing: a truce.
US President Donald Trump and Chinese President Xi Jinping have agreed to a 90-day ceasefire for the trade dispute between the two countries.
Hot on the heels of the signing of USMCA, the arrangement came this weekend on the sidelines of the G20 summit in Argentina where the two leaders met and agreed to hold off on additional tariffs at the start of the new year. This will ideally allow for negotiations to continue with the goal of reaching a trade deal.
The truce stipulates that if at the end of 90 days the two countries are not able to reach an agreement then tariffs will increase to 25% from 10% on $200 billion worth of Chinese goods, according to the White House. While no additional taxes will be imposed during this period, existing tariffs on both sides will remain in force.
As part of the ceasefire arrangement, China has also agreed to purchase a “substantial” but unspecified amount of agricultural, energy, industrial, and other US products as a way to even the trade balance between the two countries.
Both countries have also pledged to “immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft.”
The Current Tariff Situation
Over the past year, the trade dispute between the US and China has seen the two countries impose escalating tariffs on the other’s imports.
The US has placed tariffs on $250 billion worth of Chinese goods, $50 billion of which is taxed at 25% and the remaining $200 billion with duties at 10%. China has responded with tariffs on $110 billion worth of US goods.
As part of these measures, the US has imposed a 25% tariff on Chinese cars, which is on top of the 2.5% that was already in place. China, in turn, put a 40% tariff on US vehicle imports.
Trump has stated that China will “reduce and remove tariffs” on US vehicles as part of this truce, but the Chinese government has to confirm that claim.
Still a Ways to Go
While there is still a long way to go with the negotiations for this trade agreement, global markets saw an immediate jump following truce, with an advance of nearly 1% by world stocks.
The truce is welcomed news for many, but some experts have voiced caution about getting too optimistic given the relatively short 90-day window to reach a deal.
“90 days to work out a broad agreement is very short. Especially because the agreement should also encompass a deal on more sensitive issues like the theft of intellectual property and forced technology transfers in joint ventures. Most wide-ranging bilateral trade agreements take years to negotiate,” said Dutch bank ING in a statement.
