It seems all that was needed to cool off a trade war that had kept much of the global economy on edge was a two-hour dinner in Buenos Aires. President Donald Trump and Chinese President Xi Jinping agreed Saturday night that they would put a burgeoning trade war on pause for the next 90 days as both leaders said they wouldn’t impose new tariffs for 90 days while the world’s two largest economies negotiate a longer-term deal. The truce was called after a dinner that took place after the end of the Group of 20 summit in Argentina.
“Both sides believe that the principled agreement reached between the two presidents has effectively prevented the further expansion of economic frictions between the two countries,” Chinese Foreign Minister Wang Yi told reporters. As part of the agreement, Trump will keep tariffs on around $200 billion worth of Chinese goods at 10 percent, and won’t raise them to 25 percent as previously threatened. In exchange, “China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries,” the White House said in a statement.
The deadline for the longer deal though seems pretty strict as both countries agreed that if a final deal isn’t reached within 90 days then the 10 percent tariffs will automatically increase to 25 percent. And some aren’t very optimistic a deal will be able to be reached considering the preliminary agreement doesn’t tackle any of the toughest issues that have bedeviled past efforts at compromise. Yet even those who said the preliminary deal didn’t really move the needle on trade agreed the two sides did seem to make progress on cooperating on North Korea and restricting Chinese shipments of the addictive opioid fentanyl.
“This is not a suspension of the trade war but a suspension of the escalation of the trade war,” explained Stephen McDonell, BBC’s China correspondent. Yet even if it kicks the big issues for later talks, analysts said the market is likely to react positively to the agreement. “This is a strongly market positive result for the short term, since over the past few days markets have been nursing hopes that a tariffs pause of this kind would happen,” Evercore ISI head of political analysis Terry Haines wrote in a note, according to Bloomberg. “But it is not a ceasefire as some already are touting.”