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Why the US-China Trade Truce May Not Last

22 May 2018

USA stocks opened higher on Monday as investors cheered an easing of trade tensions between China and the United States.

The long-run picture may not be so sunny. Hackett said Wall Street could get over its trade worries relatively quickly if talks go well. China's relief, coming after talks last week between the world's two largest economies, elicited mixed reactions from US business leaders, with some happy to see the prospect of tariffs fade and others saying it would be hard for the Trump administration to regain momentum to address what they see as troubling Chinese policies.

In a separate controversy, the Commerce Department last month blocked China's ZTE Corp. from importing American components for seven years, accusing the telecommunications company of misleading US regulators after it settled charges last year of violating sanctions against Iran and North Korea. Most observers say a firm deal is likely to take a long time.

The clear hope is that the United States and China will reach an eventual deal on trade, one that does not lead to big tariffs on key goods that each nation exports to the other - such as American agricultural products and Chinese steel and aluminum.

"Neither side has made significant commitments at this point".

John Vail, chief global strategist at Nikko Asset Management, said that the negatives of a stronger dollar for large multinationals would be outweighed by the fact that big U.S. businesses may be more free to do business in China without fear of tariffs and a trade war.

The celebration could prove premature.

China responded by targeting $50 billion in USA products, including soybeans - a shot at Trump supporters in America's heartland. "There is still a high risk of a trade war, even if the timeline to getting there has been extended". "There is no question the United States did not move as proactively as it should have during the 2000s with China's exports to the USA were rising dramatically".

The U.S. fined ZTE $1.2 billion previous year for violating American bans on trade with Iran and North Korea. The Chinese have just agreed in general terms to purchase a bit more USA stuff", said Mr. Alden, author of the book "Failure to Adjust: "How Americans Got Left Behind in the Global Economy". She said the Chinese, who increasingly have their own technology to defend, might be open to strengthening intellectual-property protections and to pressuring local governments to stop demanding technology transfers.

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Asian stocks gained Monday and USA equity futures jumped on the news that the trade war is on hold for now.

Europe's incentives come with a threat to retaliate against the United States with European tariffs on American imports, including iconic items such as Harley-Davidson motorbikes and bourbon whiskey. "Real structural change is necessary.

We have to wait and see", said Mr. Camunez.

"China has to import a certain amount of energy from someone and needs to import either animal feed or meat to satisfy Chinese domestic demand", Setser said, adding that what Trump got from China is "the kind of deal that China would be able to offer any USA president".

"Potential trade deals with China will likely encourage steel imports once more - and, in turn, accelerate a U.S. steel price correction, in our view", he said.

This would help level the playing field between China and not only the US but other trading partners that take issue with China, including European Union members.

The U.S. -China trade truce drew fire from some who had applauded Trump's campaign pledge to overturn decades of U.S. trade policy and crack down on China and other trading partners they accuse of abusive practices. Trump wrote on Twitter on Monday. "It needs to be different this time as promised".

President Donald Trump and China's President Xi Jinping meet business leaders at the Great Hall of the People in Beijing, China, Nov. 9, 2017.

Why the US-China Trade Truce May Not Last