US President Donald Trump and his Chinese counterpart Xi Jinping on Saturday agreed to suspend any new tariffs in the escalating trade war between the world’s two largest economies. As per news agencies, following more than two hours of dinner talks between the two leaders, the White House said an increase of tariffs from 10 to 25 percent due to kick in on January 1 would now be put on hold for 90 days. The truce in the trade war will offer a space for intense negotiations between the two giants to deal with the bilateral trade issues.
The two leaders, who were in Buenos Aires for a summit of the G20 countries, called it a highly successful meeting. The principal agreement has effectively prevented further expansion of economic friction between the two countries and has opened up new space for a win-win cooperation. Under the agreement, Trump is shelving a plan to raise existing tariffs of 10 percent to 25 percent from the first day of next year. Xi avoids further immediate pressure on China’s slowing economy, while Trump — hit by the US Democrats’ congressional win in last month’s mid-term elections — can ease damage to agricultural US states that export to China.
It is noted that some $50 billion worth of Chinese imports already face 25 percent tariffs, while the 10 percent tariffs —which target a massive $200 billion in goods — will also remain in effect. Meanwhile, China has targeted $110 billion worth of US imports for tariffs. The White House made it clear that the 10 percent tariffs would still leap up to 25 percent if China doesn’t meet US demands in 90 days. The pause is a significant de-escalation, though temporary, that mirrors Trump’s approach to the EU earlier this year.
Tariffs remain in place, but the 90 days pause would allow both of them to see if there is any genuine room for compromise. It is also likely to be a good news for the stock markets in the US and China. However, the de-escalation of the trade war will hinder the potential advantage for us as many buyers were turning to Bangladesh instead of China.
