Breakingviews - New trade-war ceasefire has familiar feel

U.S. President Donald Trump shakes hands with China's President Xi Jinping before starting their bilateral meeting during the G20 leaders summit in Osaka, Japan, June 29, 2019. REUTERS/Kevin Lamarque

HONG KONG (Reuters Breakingviews) - Donald Trump threw another ceasefire into the trade-war reality show he is producing. Investors would be wise to curb their enthusiasm, though. This détente feels a lot like the last one.

The two sides are “right back on track,” Trump said on Saturday after an 80-minute meeting with Chinese President Xi Jinping on the sidelines of the G20 summit in Japan. The new tariffs he had been threatening to levy on about $300 billion of Chinese exports are being put on hold for now, while the People’s Republic will buy an unspecified amount of additional American agricultural products. Trump also added that U.S. companies could keeping selling products to Chinese telecom equipment maker Huawei even though his administration put the company on an export blacklist last month.

It is all reminiscent of how last year’s G20 summit in Buenos Aires ended. Trump would refrain from raising tariffs, the Chinese would buy more from American farmers, and talks would resume. Negotiations later abruptly collapsed and Trump said in early May he would again hike taxes on Chinese goods.

The stakes were much higher this time. Slapping additional tariffs on such a large quantity of goods would have been a serious economic blow for both countries. New forms of Chinese retaliation also awaited. In recent weeks, Beijing has not so subtly floated the possibility of targeting individual U.S. companies and weaponizing rare earths exports.

Trump’s mercurial approach makes it impossible to know whether a deal – especially one that can stick – is approaching. Trade-related news added nearly a 4% rise to the S&P 500 from the last G20 summit until last month’s escalation, Bank of America Merrill Lynch analysts estimate. Since then, they reckon it has been responsible for erasing more than 4%.

U.S. officials are saying they were about 90% of the way to an agreement before the negotiations broke down. Yet much of what has transpired over the past two months or so, especially the moves against Huawei, has only served to harden attitudes on both sides. Trump has good political reasons to eventually give in, but he may yet be willing to inject more drama before scripting a finale.


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