May 21, 2018
All it took was 8 simple words, with little factual backing and no way of enforcement, to send global markets and US equity futures soaring overnight: “We are putting the trade war on hold,” Treasury Secretary Steven Mnuchin said Sunday, refuting Trump’s prior skepticism, in which the president said the doubts China trade talks will be successful, and sending risk assets across the globe (even as most of Europe was closed due to Whit Monday) higher.
For those who missed it, on Sunday, US Treasury Secretary Mnuchin stated that US and China are putting the trade war on hold, while he added that previously announced tariffs on Chinese steel and aluminium, as well as USD 150bln of tariffs on other Chinese imports, would be placed on hold as discussions with China progress. US Treasury Secretary Mnuchin also stated that President Trump is more interested in obtaining a good deal with NAFTA partners rather than quickly concluding talks in time to be voted by Congress this year. US Trade Representative Lighthizer stated that US may still resort to tariffs and other measures such as restrictions on investment and export regulations unless China makes real structural adjustments to its economy.
At the same time, in a just as hollow vow, Beijing promised to “significantly” increase purchases of U.S. goods and services, without however mentioning a dollar figure, and focusing primarily on the energy sector, i.e., oil and refined products, something the world’s biggest oil importer would have done anyway.
These two hollow promises, which while representing a marked thaw in US-China trade relations, will do little if anything to change the complexion of bilateral trade between the two countries, and as Bloomberg writes this morning, “U.S.-China Trade Truce May Not Last With Differences Unresolved.” For now however, the world is delighted by this unexpected…