The U.S. and China have agreed to a 90-day ceasefire in the ongoing trade war between the two countries! Hooray! Let’s see how overnight futures start trading tonight and if a risk-on trade kicks in on the Russell 2000.
The 90-day truce from the trade war between the world’s two largest economies gives China time to address some of Washington’s biggest concerns, including intellectual property protections and market accessibility. But much will depend on how far China is prepared to go.
President Trump had threatened to more than double the tariffs it had already placed on $250 billion worth of Chinese imports, while Dictator Xi’s government has put targeted tariffs on $110 billion in U.S. goods.President Trump has agreed that on January 1, 2019, he will delay hiking tariffs on $200 billion worth of merchandise at the 10 percent rate, and not raise it to 25 percent as was planned. Over the next 90 days, Chinese and American officials will continue to negotiate lingering disagreements on technology transfer, intellectual property and agriculture. If at the end of 90 days, the parties are unable to reach an agreement, the 10 percent tariffs will be increased to 25 percent.
Come on China! Let’s make a fair-deal.
Dictator Xi made some major concessions to the U.S. which President Trump is keeping tight-lipped for now because of the media’s history of sabotaging his trade negotiations, and in order to not embarrass the Chinese in front of their own people.
What we do know is that it’s one of the largest trade deals ever done.
Global markets could rally at the beginning of next week as the day of reckoning in U.S.-China trade relations has been delayed for another three months.
Rumor has it that the deal involves China buying from the U.S. a tremendous amount of agricultural and other goods in an attempt to reduce the $500 billion a year trade deficit. China will buy a huge amount of agricultural, energy, industrial, and other products from the United States to reduce the trade imbalance between both countries. China has agreed to start buying agricultural product from our farmers immediately. This will have a remarkably positive effect on farming, agriculture, industrial goods, computers, and all sorts of products made in the U.S. In exchange for these concessions from the Chinese, President Trump has agreed to delay the January 1, 2019, tariff hikes for 90 days.
In addition to start buying huge amounts of U.S. goods, China will begin opening up its economy to foreign investment and to eliminate important non-tariff trade barriers. China will also be getting rid of the tariffs it has against the U.S.
That outcome from a much-anticipated dinner meeting between President Trump and Dictator Xi in Buenos Aires on Saturday, December 1, 2018, sets up a clear time frame for China to create the structural changes that the U.S. has been demanding and that the Trump administration negotiators will undoubtedly seek during future talks.
Dictator Xi could now approve a bargain for Qualcomm to buy chip rival NXP. The Qualcomm deal that China rejected, that was one of the larger deals of its kind. President Trump said that if the deal came back to him, he would probably approve it immediately.
China has also agreed to immediately start negotiations on structural changes with respect to forced technology transfer, intellectual property security, non-tariff barriers, cyber intrusions and cybertheft, services and agriculture.
But folks, let’s not make the mistake of assuming that communist Dictator Xi has any credible regarding actually doing what he says he’s going to do. Think about it. This cheating communist leader made himself President for life. Let that sink in when considering if he’s really an honorable guy that you can work a deal with it. Dictator Xi’s history suggests that this is a stalling tactic because time is on his side with President Trump half-way through his term in office. We will likely just see more of the same stalling and no significant changes coming out of China. Dictator Xi is difficult to predict and it’s hard to have a clear sense of what he’s thinking.
President Trump also made progress with reforming the WTO in which, in a joint declaration, the group of countries said the current multilateral trading system is “falling short of its goals and there’s room for improvement,” and supported reforms in the World Trade Organization. But again, this could be just another stalling tactic. If the WTO has a just and fair organization, China would have been kicked out of it over a decade ago.
Meanwhile in communist China, there was no mention of the 90-day deadline, with state media focusing instead on Beijing’s “strong” stand in the trade talks. A commentary posted on the social networking account of state news agency Xinhua said Beijing had “stood firm in protecting its core interests” and struck back in a “strong and powerful manner”. “We can see that the Chinese side has not lost its rational thinking due to bullying, nor did it panic in the face of an unprecedented trade war,” the commentary said.