The News
The US and China said they would suspend most tariffs on each others’ exports, offering a much-needed reprieve in the trade war between the world’s two biggest economies.
Stocks surged, the dollar gained, and oil prices rose on hopes that the superpowers’ fraught ties may be improving.
President Donald Trump on Monday said he will “maybe” speak with Chinese leader Xi Jinping at the end of the week, adding that “the relationship is very, very good.” Still, challenges remain: Beijing, for example, signaled it would likely maintain controls on the export of critical minerals.
SIGNALS
China climb-down could undermine Trump’s stated tariff goals
The détente with China marks the biggest walkback since Donald Trump unleashed his tariff regime earlier this year: Market volatility indicators dropped substantially, odds of a recession instantly declined, and shipments are expected to surge. But analysts also pointed out that the move undermines several of Trump’s stated goals: “I guess the notion that tariffs will pay down the deficit and for the tax cuts is off the table,” Fox Business’ Charlie Gasparino wrote. One “big loser,” Bloomberg’s Joe Weisenthal argued, is anyone who thought “Liberation Day” was part of a “brilliant, strategic plan” to benefit the US. Economist Joey Politano said bluntly: “They just keep setting their own fires and rushing to put them out.”
The View from China: Beijing’s defiance has paid off
The trade talks appeared to have achieved nearly all of Beijing’s core demands, Bloomberg wrote: “This is arguably the best outcome that China could have hoped for — the US backed down,” a Trivium China analyst said. “Going forward, this will make the Chinese side confident that they have leverage over the US in any negotiations.” Beijing had remained defiant throughout Donald Trump’s escalating trade war, vowing to “fight to the end” and refusing to lower duties unilaterally. CNBC’s Beijing bureau chief said that Chinese state media has hailed the outcome as proving “China’s firm countermeasures and resolute stance have been highly effective.”
Trump could now set sights on the European Union
Donald Trump on Monday criticized the European Union, saying the bloc “is in many ways nastier than China” — an indication that his trade conflict with Brussels could only be heating up. The remark came just days after Trump described European Commission President Ursula von der Leyen in glowing terms, injecting some hope among European officials who are keen on sealing a trade deal. Brussels has floated some concessions toward the US, but also threatened more tariffs if talks stall. The situation resembles a “marriage crisis,” Belgium’s defense minister told The Washington Post: In this analogy, the marriage hasn’t ended yet, so the EU should “be calm” and not go searching for another partner, like China, he said.