Trump, Xi agree to temporary truce on trade

Randal Sanchez
December 4, 2018

But no target dollar amount was announced - an omission that shows the two sides will have to haggle over how much China is willing to import from the United States.

After a two-and-a-half hour dinner with Chinese President Xi Jinping (習近平) on Saturday in Buenos Aires, Trump agreed to postpone an increase in the tariff rate on US$200 billion worth of Chinese imports to 25 percent from 10 percent that was scheduled for January 1. And it does provide yet another opportunity for some sort of lasting deal. That ethos, driven by center-left politicians from the USA and Canada, is pretty much the exact opposite of Trump's desire for bilateral, transactional, anything-goes deals that privilege culturally similar partners.

U.S. President Donald Trump says China agreed to "reduce and remove" tariffs on American a result of a trade war ceasefire.

The official Chinese news agency, Xinhua, was somewhat more circumspect in its reporting of the meeting. Now comes the hard part for negotiators who will have 90 days to resolve major differences.

Instead, Xinhua stressed the two leaders had agreed not to escalate the tariff war and to "take immediate efforts to address issues of mutual concern based on mutual respect, equality and mutual benefit".

There was no immediate USA confirmation of the outcome of the talks, but Chinese state TV said: "No additional tariffs will be imposed after January 1, and negotiations between the two sides will continue".

Still, the market could take a positive view of the development.

Brent crude was trading back above $60 a barrel at $62 after a jump of 4%.

However, there will be some interesting concrete signals within that period.

Mr Trump's tweet did not give any further detail about the tariff cuts, such as when the deal had been reached or a new level for the Chinese levies.

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There is something of an irony in this.

U.S. Treasury Secretary Steven Mnuchin said on Monday there was a clear shift in tone at Buenos Aires from past discussions with Chinese officials, as Xi offered a clear commitment to open China's markets to U.S. companies.

"Mnuchin said China had agreed to make "big, long-term commitments" to purchase USA liquefied natural gas", provided that the United States builds sufficient export terminals.

US exports of cars and light trucks to China were worth $9.5 billion in 2017 and have dropped off significantly since China imposed its retaliatory tariffs over the summer that gave exporters in Europe and Japan a significant advantage.

Japan's Nikkei Stock Average rose 1%, China's Shanghai Composite gained 2.6% and South Korea's Kospi stock indexes gained 1.7%.

Xi also reiterated China's stance on the Taiwan issue and the US side pledged to continue to adhere to the one-China policy. No cargoes are now booked to arrive in December, or beyond, according to the data.

Another significant take-away from the preliminary agreement could be its impact on energy markets, both USA oil import to China and perhaps even more importantly from a development perspective liquefied natural gas (LNG) imports.

However, no cargoes are slated for arrival in December or beyond.

China has had a 25 percent tariff on imported cars for years, forcing many foreign automakers to partner with Chinese companies and manufacture autos in China for that market. Both companies build cars for the Chinese market at USA plants, which are thus subject to the Chinese tariffs.

If the Chinese did eventually increase such purchases, it would be warmly welcomed in the U.S. Farm Belt, where producers of soybeans and other crops have been hurt by Beijing's retaliatory tariffs. A total of $US10.5 billion worth of new and used cars were shipped to China from the United States in 2017, according to the Census Bureau. That's because the German luxury brands dominate the top 10 list of vehicle imports into China.

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