US, China reach 90-day truce on trade tariffs
03 December 2018
The United States and China on Saturday announced a 90-day truce on new penal tariffs imposed on each other’s products following widening trade disputes that has rattled markets and threatened to stunt global economic growth.
The breakthrough came after a working dinner attended by US President Donald Trump, Secretary of State Mike Pompeo and Trump's national security adviser John Bolton with Chinese President Xi Jinping on the sidelines of the Group of 20 summit in Buenos Aires on Saturday.
Trump agreed to hold off on plans to raise tariffs 1 January on $200 billion in Chinese goods. The Chinese agreed to buy a “not yet agreed upon, but very substantial amount of agricultural, energy, industrial” and other products from the United States to reduce America’s huge trade deficit with China, the White House said.
The truce buys time for the two countries to work out their differences in a dispute over Beijing’s aggressive drive to supplant US technological dominance.
The two countries also agreed to label fentanyl, the deadly synthetic opioid responsible for tens of thousands of American drug deaths annually, as a controlled substance.
The White House announcement said the truce agreement is a victory for Trump as it secures a commitment from China to engage in talks on key US economic priorities, with little obvious concession by the US.
The White House, however, appears to be making a climb-down from its previous threats to tie trade discussions to security concerns, like China’s attempted territorial expansion in the South China Sea.
Trump, however, cancelled a meeting with Russian President Vladimir Putin over mounting tensions between Russia and Ukraine. He also cancelled a Saturday news conference, citing respect for the Bush family following the death of former President George HW Bush.
Trump said Bush’s death put a “damper” on what he described as a “very important meeting” with Xi.
White house has imposed import taxes on $250 billion of Chinese products — 25 per cent on $50 billion worth and 10 per cent on the other $200 billion. Trump had planned to raise the tariffs on the $200 billion to 25 per cent if he couldn’t get a deal with Xi.
China, on the other hand, has slapped tariffs on $110 billion of US goods.
Under the agreement reached in Buenos Aires, the two countries have 90 days to resolve their differences over Beijing’s tech policies. If they can’t, the US tariff increases will go into effect on the $200 billion in Chinese imports.
While the exact extend of the impact of the trade war is not known, there is growing concern s that the trade war will increasingly hurt corporate earnings and the US economy.
And, despite China’s tough posture, China’s high-tech industry will take a big hit if the US market becomes inaccessible for its products.