U.S. President Donald Trump and Chinese President Xi Jinping found some common ground at their crucial meeting this week-end at the G20 summit in Argentina, agreeing to put their bilateral trade dispute on pause momentarily. According to reports, they struck a deal to hold off on placing additional tariffs on each other's goods after January 1, while agreeing to continue talks for a permanent end to the major issues.
The Whitehouse reported that Trump and Xi discussed a range of issues including the trade dispute that has left over $200 billion worth of goods hanging in the balance.
"President Trump has agreed that on January 1, 2019, he will leave the tariffs on $200 billion worth of product at the 10 percent rate, and not raise it to 25 percent at this time," the statement read.
"Both parties agree that they will endeavor to have this transaction completed within the next 90 days. If at the end of this period of time, the parties are unable to reach an agreement, the 10 percent tariffs will be raised to 25 percent," the statement added.
In the meantime, "China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries. China has agreed to start purchasing agricultural product from our farmers immediately," the White House said.
Going into the meetings, Strategas placed 40 percent odds that the two sides would agree to further talks without halting a plan to increase the China tariffs to 25 percent in January.
Strategas also said the worst case would be if talks broke down altogether. This was, however, considered highly unlikely and would have potentially been very negative for the stock market.
According to Strategas, odds for a deal that includes a ceasefire on further tariffs were about 30 percent. The firm also saw even lower odds, 20 percent, for a deal that would include a ceasefire and a roll back in tariffs.
Impact on the Markets
Overall, the news is good, particularly China's agreement to purchase a very substantial amount of U.S. products. The news should help boost the stock market, crude oil and soybeans. Treasury yields could fall as well as safe-haven demand for the U.S. Dollar. This could help underpin gold prices .
This article was originally posted on FX Empire
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