While the 90-day deadline gives both sides breathing space, Ankit Panda argues that more is needed to finally end the trade war
The dust has settled in the trade war between the United States and China. After their hotly anticipated dinner meeting in Buenos Aires, Argentina, on the sidelines of this year’s G20 leaders’ summit, US President Donald Trump and his Chinese counterpart Xi Jinping found the necessary ingredients for what amounts to a temporary truce.
The war isn’t over, but it’ll cool as 2018 comes to an end.
The G20 truce shouldn’t leave investors worry-free, but it is likely to give markets the short-term confidence needed to end 2018 on a high note.
The biggest headline is that both sides have agreed to temporarily hold off on the implementation of new tariffs.
Critically, that includes the previously slated January 1 increase from 10 to 25 per cent on some US$200 billion in Chinese goods.
Beijing, too, will hold off on escalating in the meantime with retaliatory action, working instead to purchase what the White House has said will be a “very substantial” amount of US goods in the agricultural, energy, and industrial sectors.
This amounts to a tactical pause, giving both sides time to work out the details, both of how China will in the short-term live up its promise to buy US goods and, more seriously, how the two sides will resolve the fundamental philosophical differences that continue to divide them on trade.
Beyond the staying of further tariff implementation, the second most important outcome of the G20 encounter is that we’re now entering another period of protracted uncertainty.
