ibusinesslines.com
ibusinesslines.com December 16, 2018


DEVELOPING: US-China trade uncertainty fuels market plunge

05 December 2018, 01:08 | Kelvin Horton

What Trump Expects by Giving China a 90-Day Tariffs Break

Donald Trump threatened to slap a range of import penalties on Chinese products if they didn't make major changes in their economic relationship with the US

President Donald Trump tweeted late Sunday that China would "reduce and remove" its 40 percent tariff on US cars.

In a briefing to reporters, he also said the USA did not yet have a "specific agreement" on auto tariffs.

Chinese officials discussed the possibility of lowering tariffs on US vehicle imports before Xi met Trump in Argentina, according to a person familiar with the situation who asked not to be identified.

Stocks fell following Trump's tweetstorm with the Dow Jones industrial average declining almost 3%.

Central to the deal was an agreement between President Trump and China's President Xi Jinping to not increase tariffs for 90 days to allow for talks.

The White House said Xi said he was open to approving the previously unapproved Qualcomm-NXP deal should it again be presented to him. "But if not remember, I am a Tariff Man", the commander-in-chief wrote about the agreement.

Trump said he and Xi "are the only two people that can bring about massive and very positive change, on trade and far beyond, between our two great Nations". White House economic advisor Larry Kudlow said the figure was a broad benchmark that would depend on private transactions for U.S. goods and was subject to market conditions.

Markets took a dive following Trump's tweetstorm.

Financial markets surged on the news of the ceasefire, with the benchmark Dow Jones Industrial Average up 1.2 per cent, more than 300 points, about 30 minutes after the open, relieved that some of the immediate threat of further damage was averted. An actual deal with China to drop tariffs could help offset the political pain associated with the GM layoffs.

Trump said China had committed to buying large amounts of US agricultural products and completely removing all tariffs on US automobiles a huge shift from its current 40 per cent penalty although China hasn't confirmed this

Uncertainty also surrounded the details of the broader trade war truce struck by the USA and China at the G20 summit. He said Xi already agreed to take concrete steps toward alleviating the trade war. "We said that you also have to demonstrate greater market access, and one of the many ways they can do that is by purchasing hundreds of billions of dollars of both agriculture and non-agriculture products".

"Both parties agree that they will endeavor to have this transaction completed within the next 90 days".

Trump agreed he will leave the tariffs on $200 billion worth of Chinese products at 10 percent, and not raise it to 25 percent as he has threatened to do January 1, according to a White House statement.

In late March, Washington imposed 25 percent tariffs on steel imports and 10 percent on aluminium imports, initially exempting an array of countries from the new regulation.

China's foreign ministry said on Monday that the two presidents had instructed their economic teams to work towards removing all tariffs.

China and the United States agreed on Saturday to a ceasefire in a months-long trade war that has roiled global markets and halted sales of US soybeans to the world's top buyer. U.S. Treasury Secretary Steven Mnuchin has made it clear there's only one person leading the trade negotiations with China. "Unless extended, they will end 90 days from the date of our wonderful and very warm dinner with President Xi in Argentina", Trump tweeted.

"The fear across global markets is that this is just a short term relief rally and we will find ourselves back where we were a few weeks ago and staring down the barrel of a long term global growth slow down", Nick Twidale, Sydney-based analyst at Rakuten Securities Australia said in a note.

This was also the first time that the president suggested the negotiating window could be extended.

"We don't yet have a specific agreement on that", Kudlow said on a conference call with reporters.




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