Hopes rise over US-China trade resolution – but issues remain

Hopes are rising that Washington and Beijing will reach a deal to end a long-running trade war after US President Donald Trump declared sufficient progress had been made between the two sides.

In a tweet on February 24, 2019, the US president said the developments are related to “important structural issues including intellectual property protection, technology transfer, agriculture, services, currency and many other issues”. He went on to announce a delay on a planned hike in tariffs from 10% to 25% on $200 billion of Chinese products that would have come into effect on March 1, 2019.

Trump said he would meet with President Xi Jinping at his Mar-a-Lago resort in Florida to “conclude an agreement” if additional progress is made. Chinese stocks rose sharply following the announcement.

Despite the initial positivity, investors will be looking at the deeper issues underlying the trade war.

“President Trump announcing a delay in raising tariffs on Chinese imports has been in the works for some time. The high frequency engagement between Beijing and Washington at a senior level implies that both sides are looking for some form of settlement,” said Tai Hui, chief market strategist, Asia Pacific at JP Morgan Asset Management.

“Moreover, with growing questions over the growth outlook in the US, further tariff escalation would add more uncertainty to this concern. Still, there are plenty of long-term structural issues for both sides to lock horns over, such as market access and IPR protection.

“I think the market has been moving towards this view in recent weeks, as shown by the strong performance in China A Shares and Asian equities. Hence, the latest news may not offer a significant boost to start the week,” added Hui.

©2019 funds europe

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