The US and China reach trade war truce – but how long will it last?

by 21 May, 2018

 

The results of fresh negotiations between the US and China on trade so far appear inconclusive, but equity markets are rising bullishly regardless.

The Trump administration has secured a significant win in that Beijing has agreed to import more goods from the US in order to begin to tackle the gigantic trade deficit between the pair, however China made no mention of whether it would reach the $200 billion target which the White House had requested.

This is a good start, but the key question for investors was whether either nation would drop the threat of placing tariffs on billions of Dollars worth of goods from the other. The answer to this was less comforting. Treasury Secretary Steven Mnuchin told Fox News the two sides had agreed to put tariffs “on hold” while they tried to execute a framework, indicating both countries may still use them if needs be. As such, this agreement may only prove to be a temporary respite in hostilities if China does not fulfil its commitments to take more US exports or give way on intellectual property issues.

Regardless, global markets look broadly stronger today off the back of the news which investors took as a cue for optimism. The Cboe UK 100 index led the way in Europe up 0.87%, as a rally in the Dollar pulled the value of the Pound lower, helping to lift British stocks. The S&P Asia 50 gained 0.43% by the close, while S&P500 futures also moved up 0.55% indicating a stronger open for US indices later today. Today is likely to be a ‘risk-on’ upbeat day for traders.

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