Chinese stocks surge as trade war truce with USA gathers pace

Chinese stocks surge as trade war truce with USA gathers pace

Analysts at Danske Bank suggest that markets in Asia were buoyed by the trade agreement between the U.S. and China at this weekend's G20 meeting as the agreement between the USA and China provided a 90-day truce allowing for negotiations on a permanent trade deal.

Trump hit an additional $200 billion of Chinese goods with a 10 per cent tariff that had been due to rise to 25 per cent on January 1.

"According to a tweet from President Trump over the weekend, the Chinese side had also agreed to "reduce and remove" tariffs on American cars from 40% now". Tariffs remain in place, but the tit-for-tat will pause to see if there is any genuine room for compromise.

Chinese officials as well as multiple state-run media outlets have made no mention of those specific concerns or the 90-day deadline, . raising speculation that both nations could end up locking horns again three months from now. China retaliated with tariffs on $110 billion of U.S. imports.

The US trade deficit with China was Dollars 335 billion previous year and many manufacturers rely on inputs from the world's number two economy, so eliminating the deficit would be an extraordinary goal.

Chinese regulators did not respond to requests for comment on Trump's tweet on autos tariffs.

Nevertheless, the better-than-expected outcome should help reduce near-term uncertainty and improve market sentiment.

Chinese shares, commodities and the yuan currency surged.

Beijing previously agreed to narrow its trade gap with the United States by purchasing more soybeans, natural gas and other exports but scrapped that after Trump's tariff hikes went ahead. As such, China will likely manage its exchange rate closely to keep it from depreciating much.

Both sides will immediately hold talks on structural changes concerning forced technology transfers made by Chinese firms on US companies, intellectual property rights protection, non-tariff trade barriers, cyber intrusion concerns, cyber theft and agricultural, the White House added.

Xi appears to have offered up non-trade measures to build goodwill in the relationship at a time of multiple converging tensions, from the South China Sea to Taiwan.

"It's great the two sides took advantage of this opportunity to call a truce", said Andy Rothman, investment strategist at Matthews Asia.

Perhaps the most obvious impact of the trade dispute so far has been China's decision to nearly totally cut out imports of US soybeans and energy commodities such as crude oil, coal and liquefied natural gas (LNG).

The biggest headline is that both sides have agreed to temporarily hold off on the implementation of new tariffs.

Similar to crude, no USA cargoes of LNG - which is subject to Chinese tariffs - arrived in China in October, although two were discharged in November.

China has already said that it would enhance IP court system and introduce punitive damage on IP violations.

There are also differences in the Chinese and US accounts of what was agreed.

If Trump wants a win from this battle, he'll need to understand that Xi won't give in easily.

But this dropped to zero in October, and in November one cargo of US crude was discharged, according to ship-tracking data compiled by Refinitiv.

Discussions were to begin immediately, with the goal of an agreement within 90 days.

What this means in terms of the Trump-Xi meeting at the G20 is that it's going to be apparent fairly quickly if China is going to switch tactics and resume buying US commodities.

China, the world's largest car market, raised tariffs on U.S. auto imports to 40 percent in July, forcing many automakers to hike prices in a major hit to the about US$10 billion worth of passenger vehicles the United States sent to China a year ago.

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