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Peace has broken out in the trade war between the United States and China, but for how long?
There is relief in the markets this morning after the two sides Finally signed its long-awaited Phase One trade agreement … but is also concerned that the agreement does not provide a great boost to the global economy
As we covered last night, China agreed to buy $ 200 billion of US products over the next two years, including at least $ 32 billion of additional agricultural products.
By signing the agreement last night at the White House, Chinese Deputy Prime Minister Liu He pledged to work with Washington to implement the agreement.
Liu told a room full of American business leaders that:
“The Phase One agreement will help maintain world peace, stability and prosperity. The United States and China can work together to achieve a mutually beneficial relationship despite differences in policy, economic model. “
Trump (who never lets the trumpet blow) says it is “the biggest deal in history” … “Momentous” was also mentioned, as the president declared a break in relations with Beijing.
Here is a breakdown of China’s commitments:
- Goods manufacturing: at least $ 32.9bn more in 2020, increasing to $ 44.8bn more in 2021
- Agricultural products: at least $ 12.5 billion more in 2020, increasing to $ 19.5 billion in 2021.
- Energy products: at least $ 18.5 billion more in 2020, increasing to $ 33.9 billion in 2021
- Services: at least $ 12.8 billion more in 2020, increasing to $ 25.1 in 2021
The agreement means that some planned tariffs for consumer electronics products manufactured in China have been canceled and others have been reduced.
However, the reality is that difficult issues such as China’s state subsidies and forced technology transfer from US companies have not yet been addressed.
And that means the United States is applying tariffs to around $ 360 billion on Chinese products, including food, chemicals, industrial products and some electronic products.
Rebecca Harding, commercial economist and CEO of Coriolis technologies says the agreement is “completely political”:
In an election year, President Trump can present this as a victory for American manufacturers and producers.
It also retains influence over China in any future trade agreement that can be negotiated. Problems related to the “theft” of China’s Intellectual Property and its security risk to the United States economy have become a subsequent agreement that is unlikely to be signed before the US presidential elections.
Merchants seem to agree that the agreement, although welcome, is not really innovative. Shares rose, bringing the Dow Jones industrial average to a new closing high of 29,030.
Australia’s stock market has reached a new closing high, with the hope that Chinese demand for Australian raw materials will remain well.
But soybean prices have fallen overnight, due to the disappointment that China is not making major commitments, and concerns about how the agreement will be enforced.
We will follow the reaction to the agreement today.
Also comes today
It is a busy morning in the city, with several UK companies reporting weak results.
Pearson, the publishing company, has only reported fixed revenues for 2019 due to a sharp drop in sales in the US. UU. This means that earnings will lose forecasts.
Recruiting company Hay They warned that operating profits were affected by a slowdown in hiring, in the United Kingdom, France and Australia.
Fashion retailer N Brown He also warned that the earnings will not meet the forecasts, partly due to the strong discounts on the main street.
Hotel chain White bread It is also finding difficult conditions, reporting a 1.3% drop in comparable sales in the United Kingdom.
HalfordsHowever, he is optimistic after selling a record number of children’s bicycles last year. And discount chain Primark has reported a rebound in demand in the eurozone.
More on all that soon too …
- 9.30 a.m. GMT: Bank of England survey on credit conditions in the United Kingdom
- 13:30 GMT: retail sales in the United States for December
- 13:30 GMT: weekly unemployment figures in the US UU.