Two largest economies agree to halt hostilities through first quarter after a year of trade saber rattling.
The U.S. and China called a 90-day truce in their trade war, postponing the New Year’s tariff boost on $200 billion worth of goods.
The White House issued a statement overnight that President Donald Trump and President Xi Jinping had a “highly successful meeting” at a weekend meeting during the G20 summit in Argentina.
“This was an amazing and productive meeting with unlimited possibilities for both the United States and China,” Trump said. “It is my great honor to be working with President Xi.”
Trump agreed that the U.S. will postpone the start of 25% tariffs on Chinese goods, but the 10% tariffs on the goods will remain in place.
In return, China will buy a “not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product” in a move to reduce the now $301 billion trade surplus it has with the U.S.
The January 1 deadline on new tariffs has been seen as one of the major drivers of the surging volumes of goods moving into the U.S. during the third and fourth quarter of this year.
The delay in the tariff increase will occur while the U.S. and China begin a 90-day negotiation period to discuss the issues that brought the two sides to the trade war in the first place. Those include forced technology transfer, intellectual property protection, and other trade barriers.
One of the casualties of the trade war was a failed $44 billion merger between chip makers Qualcomm (Nasdaq: QCOM) and NXP (Nasdaq: NXPI). China was the only country to not approve the deal between the U.S. and Dutch firms, ostensibly over anti-trust issues, but the trade battle likely played a hand in the move.
The U.S. warned that if the negotiations do not bear fruit, it will go ahead with the 25% tariffs.
There was no statement from the White House on the status of existing tariffs on $50 billion worth of Chinese goods. A separate statement from China’s trade representatives said that both sides will work toward the end of all tariffs.
The White House says the two sides will also work on national security issues including working on a nuclear-free North Korea and China’s agreement to regulate the production and export of fentanyl, which has been blamed for numerous drug deaths in the U.S.