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Trade War Averted – Trump and China Sign Off on Phase One

The U.S. and China agree to phase one, averting the December 15 deadline.

What a day it was to be a fly on the wall in the Oval Office and to be a stock market trader. After 18 long, arduous, and frustrating months, the U.S. and China have finally agreed to phase one of a comprehensive trade agreement ahead of the December 15 deadline to impose new tariffs on billions in Chinese products. If your blood pressure has gone through the roof during these will-they-or-won’t-they times, then get prepared for what phases two and three negotiations will be like. Better grab some Pepto Bismol and Tums – it is going to be a bumpy ride in the global economy.

Tariffs Averted

President Donald Trump and his administration are officially moving ahead with phase one of the U.S.-China trade agreement that helps both nations avert the December 15 tariffs. Trump met with his trade advisers on Thursday afternoon and ironed out a proposal that would please the world’s two largest economies. Bloomberg has reported that President Trump signed off on the deal.

Under the plan, the White House scraps the 15% duties on the remaining $160 billion in Chinese goods (clothing, computers, smartphones, and toys) and cuts some of the current tariffs on about $360 billion in half. President Trump had originally said that he was not in favor of rolling back the levies until a comprehensive deal was in place, but he appeared to make a concession.

The news has reacted positively all day to the upbeat trade talks.

President Trump kicked off Thursday with a tweet ahead of his meeting with his top trade advisers. In a tweet heard around the world, he stated that the U.S. and China are “very close to a big deal.” This bolstered financial markets, lifting the S&P 500 to a new all-time high and gave the Dow Jones a triple-digit gain.

This is exactly what markets have been waiting for since October, when the White House announced the first phase that covers a whole host of issues, including China buying more U.S. agriculture and opening its financial sector to American banks. It has been a roller-coaster ride over the last two months with the president telling reporters that he could wait until after the 2020 election to make an agreement and claiming that Beijing wanted a deal more than he did. In his recent tweet, he told the world that “they want it, and so do we!”

Next Stop: Phase Two

With the first phase finally out of the way, Washington and Beijing can concentrate on working out the details of phase two. Analysts are skeptical that trade representatives can make it quick and painless since this part of the negotiations will focus on the meat and potatoes of talks, including intellectual property theft, currency manipulation, and industrial subsidies. If the Trump administration can establish phases two and three before the November general election, then perhaps he was The Chosen One after all (sorry, media, we are being facetious).

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Read more from Andrew Moran.

Read More From Andrew Moran

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