Reuters
11 min read
NEW YORK/SINGAPORE (Reuters) -U.S. and Chinese officials said they had agreed on a framework to put their trade truce back on track and remove China's export restrictions on rare earths while offering little sign of a durable resolution to longstanding trade differences.
China's Vice Commerce Minister Li Chenggang said the two teams had agreed on implementing their Geneva consensus and would take the agreed framework back to their leaders.
A White House official said the deal allows the U.S. to charge a 55% tariff on imported Chinese goods. This includes a 10% baseline "reciprocal" tariff, a 20% tariff for fentanyl trafficking and a 25% tariff reflecting pre-existing tariffs. China would charge a 10% tariff on U.S. imports.
MARKET REACTION:
Equity markets and the dollar were muted, with S&P 500 up 0.1%, while awaiting more detail of what was decided and whether it would stick.
QUOTES:
GENE GOLDMAN, CHIEF INVESTMENT OFFICER AT CETERA INVESTMENT MANAGEMENT, EL SEGUNDO, CA:
"Equity markets breathed a sigh of relief on news of a potential US-China trade deal. However, I would take this news with a bit of caution. While President Trump indicated favorable news that imports on Chinese imports would rise from 30% to 55% and Chinese rare-earth exports may resume, there is little news on what China gets in return. I doubt this is a one-way deal and hence the market caution seen overnight."
SAM STOVALL, CHIEF INVESTMENT STRATEGIST, CFRA RESEARCH, ALLENTOWN, PENNSYLVANIA:
“We’ve seen a relatively muted reaction to the news of a ‘deal’ with China, and to me that signals indifference. It says, OK, you have agreed to continue talking and set up a framework for future talks, but nothing all that significant has really been resolved. The market is saying, tell me something worth knowing about. And we all know that if we don’t have a comprehensive solution, it’s not going to be good. It would mean we have to purchase our 30 dolls for Christmas somewhere else, which will be much more expensive.
"This is just my own reading of this, but in the face of better-than-expected inflation numbers today, the market is struggling to hold onto its gains and I can only think that it’s that people needed to see more from the China talks. Perhaps investors sold on strength, out of the opinion that we’re overbought at this stage.”
OLIVER PURSCHE, SENIOR VICE PRESIDENT, ADVISOR, WEALTHSPIRE ADVISORS, WESTPORT, CONNECTICUT:
"It's a done deal according to President Trump, but we haven't seen any details, which is why I think the market is not reacting to it yet. As with just about everything, the devil is in the details... The other big piece of news is the U.S. and China seem to have a framework for further discussions, and that contradicts a statement of, it's a done deal.
