Optimism over trade deal as US delays tariff hike

Markets in Asia close higher; US-China trade talks now focused on how to enforce deal

US President Donald Trump during a meeting with Chinese Vice-Premier Liu He (third, right) in the Oval Office at the White House in Washington, on Feb 22, 2019.
US President Donald Trump during a meeting with Chinese Vice-Premier Liu He (third, right) in the Oval Office at the White House in Washington, on Feb 22, 2019.PHOTO: REUTERS

The United States will delay a tariff hike on US$200 billion (S$270 billion) worth of Chinese goods which was scheduled to take effect this weekend, giving negotiators more time to resolve the trade dispute that has unsettled markets worldwide for months.

The talks are now said to be centred on how any potential deal is to be enforced.

If all goes well, there will be "very big news over the next week or so", US President Donald Trump told state governors on Sunday night, hours after he announced that the tariff hike would be pushed back to an unspecified date.

Chinese stocks posted their biggest single-day gains in more than three years yesterday, buoyed by expectations that a trade deal between the world's two largest economies would be reached soon.

US stocks opened higher yesterday after the latest developments. The Dow Jones Industrial Average rose 94.34 points, or 0.36 per cent, at the open to 26,126.15. The S&P 500 opened higher by 11.68 points, or 0.42 per cent, at 2,804.35.

Shanghai surged nearly 6 per cent, while Shenzhen added more than 5 per cent. Elsewhere in Asia, markets mostly closed in positive territory, with Hong Kong adding 0.5 per cent, Tokyo rising 0.48 per cent and Taiwan advancing 0.66 per cent. However, Singapore and Seoul ended mostly flat for the day, with analysts saying that the markets had already priced in the positive news earlier.

The US and Chinese negotiating teams, which extended their discussions into the weekend after reaching a currency stabilisation deal, wrapped up talks on Sunday.


Mr Trump wrote on Twitter that they made substantial progress on important structural issues including intellectual property protection, technology transfer, agriculture, services and currency. He added that should both sides make additional progress, a summit between him and his Chinese counterpart Xi Jinping at his Mar-a-Lago estate in Florida would be in the works.

Mr Trump said that they "still have a little ways to go", while analysts warned that the delay in the tariff hike did not definitively mean a deal had been sealed. The planned hike from 10 per cent to 25 per cent was due to take effect at the stroke of midnight on Friday.

Reuters reported that the enforcement of any such deal was the latest sticking point.

Ensuring the Chinese comply with their commitments to reform has long been a top concern of Washington's, but Beijing has been more lukewarm on enforcement mechanisms, calling instead for a fair and objective process.

Like Mr Trump, Chinese news agency Xinhua said yesterday that the US and China made substantial progress in negotiations. The delegations "came a step closer to realising the important consensus reached" by Mr Trump and Mr Xi in December, when they agreed to a 90-day truce in their trade war, said Xinhua.

Analysts said that though the trade war may end soon, the new phase of US-China relations - marked by tensions and an open regard of each other as strategic competitors - would not.

"We can expect more differences between the two countries on strategic issues such as the South China Sea and Taiwan," said Sino-US expert Shi Yinhong of Renmin University.

"After some time, Mr Trump is likely to restart the trade war to extract more concessions from China," said Professor Shi.

"In the next three, five to 10 years, Sino-US bilateral ties will become even worse," he predicted.


A version of this article appeared in the print edition of The Straits Times on February 26, 2019, with the headline 'Optimism over trade deal as US delays tariff hike'. Print Edition | Subscribe