Trump, Xi agree to temporary truce in bid to contain trade war

President Donald Trump, from the right, Secretary of State Mike Pompeo, Trump's national security adviser, John Bolton, and Chinese president Xi Jinping, left, take part in a working dinner after the summit of the G20 leaders on Saturday in Buenos Aires. Photo credit: REUTERS

President Donald Trump and Chinese President Xi Jinping agreed to prevent their trade war from escalating with the promise to stop imposing new 90-day tariffs because the world's two largest economies are entering into a sustainable agreement.

Due to the deal, it is unlikely that the US will comply with China's 40 percent rights to light vehicles built in the United States, a move that the US government has been considering over the past few weeks.

The US imposes a 27.5 percent tax on imported cars & light trucks from China.

Prices on some Chinese new vehicles have increased as a result of the 40 percent rates that the country has placed on American cars and light trucks since the summer. Tesla Inc., Ford Motor Co., BMW AG and Daimler AG have increased prices in China or absorbed part of the costs, but sales have been dented.

The cease-fire between the US and China arose after a long-awaited evening meal between Trump and Xi on the sidelines of the top of the Group of 20 in Argentina. The leaders agreed to pause the introduction of new tariffs and intensify their trade negotiations, Chinese Foreign Minister Wang Yi told the reporters hours later in Buenos Aires.

"Both parties are of the opinion that the agreement in principle between the two Presidents has effectively prevented the further expansion of economic frictions between the two countries," he said.

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The White House called the meeting "very successful", saying that the US will leave the existing rates at $ 200 billion in Chinese goods by 10 percent and that rate will not increase to 25 percent as planned on January 1st. In return, the US wants an immediate start to talk about Trump's biggest complaints about Chinese commercial practices: theft of intellectual property, non-tariff barriers and forced transfer of technology.

After 90 days, if there has been no progress with structural reforms, the US will raise rates to 25 percent, said press officer Sarah Huckabee Sanders of the White House in a statement. China also agreed to encourage the purchase of agricultural and industrial goods to reduce inequalities in trade with the US, she said.

"It's an incredible deal, it's going down, certainly – if it happens, it's going down as one of the biggest deals ever made," Trump told reporters on Air Force One when he returned from Argentina. "China currently has major trade barriers – major tariffs – and large non-tariff barriers, which are brutal, and China will lose a lot of them."

Investors have eagerly sought signs that progress has been made to keep an already costly trade dispute in a new and wider cold war. White House economics adviser, Larry Kudlow, said the meeting was "very good" in a brief comment to reporters when the Trump delegation left Buenos Aires for Washington.

Market positive

"This is a strong positive market result for the short term, as markets have hoped for such a break in the past few days," Evercore ISI head of Terry Haines' political analysis wrote in a note. "But it is not a cease-fire, as some are already reciting."

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The result gives both parties enough to show off a victory without resolving the fundamental differences between them. China is being suspended for additional tariffs, while the United States is getting larger purchases of agricultural products while maintaining leverage to move towards more structural changes in the economy.

"Neither party has set their maximum requirements and it is not the first time in US-China relations that both parties claim victory," said Michael Pillsbury, a senior fellow at the Hudson Institute and a defense officer among presidents including Ronald Reagan. and George W. Bush. "Both parties avoided the worst case scenario."

The meeting ran longer than planned and ended after more than two hours. At the start of dinner, Trump struck an optimistic tone.

& # 39; My relationship is very special, the relationship I have with President Xi, & # 39; Trump said as the two men sat at the table.

Xi said through a translator: "Only with cooperation between us can we serve the interests of global peace and prosperity and therefore I look forward to this meeting."

Previous threats

The meeting was the first personal meeting between the leaders in over a year, a period in which Trump imposed fares on billions of dollars in Chinese imports in an attempt to force Beijing to stop trade practices that the US. unfair. Trump had warned that a disappointing outcome could cause more US rates.