Donald Trump and Xi Jinping each got something out of hitting pause on a trade war that threatens both of their economies, but analysts stressed that the tenuous truce does little to address the core sticking points of their economic rivalry.
The White House said it would postpone for 90 days a planned increase of US tariffs on Chinese goods, while China pledged to take in more US imports.
The steps temporarily pause an escalating confrontation between the world’s two largest economies that has rattled world markets.
Trump launched the bitter row earlier this year by implementing tariffs on billion of dollars in goods from China, which he accuses of market barriers and predatory practices that Washington says make fair trade impossible. The tariffs prompted tit-for-tat responses from Beijing.
After months of sabre-rattling, however, Trump praised an “amazing and productive” meeting with Xi at the G20 on Saturday, and Chinese state mouthpiece Xinhua news agency said the outcome in Buenos Aires “needs to be cherished.”
“This is good news for both countries, and a relief for the international community,” Xinhua said.
The pauses allows Xi to stave off an escalation of the pressure that higher tariffs would place on his country’s slowing economy.
At the same time, Trump — stung by the US Democrats’ congressional win in mid-term elections — can avoid further pain for agricultural US states whose exports of key crops like soybeans to China have been hit, said Beijing-based political consultant Hua Po.
“This was a rare opportunity for China because (the mid-terms) made Trump a lame president. So at this time it was acceptable for China to maintain some bottom lines while making concessions,” Hua said.
But analysts said the two sides remain miles apart on key issues.
Trump may come under pressure once scrutiny of the cease-fire reveals that Xi got off “without yielding any meaningful concessions,” said Brock Silvers, managing director of Shanghai-based investment advisory Kaiyuan Capital.
“The tensions have only been delayed, not resolved, and unless China quickly finds the political will to make a long-term peace via significant concessions on technology issues, this week’s expected gains may prove to be temporary,” he said.
Indeed, the truce is only partial.
Some US$50 billion worth of Chinese imports already face 25 percent tariffs.
And while existing 10 percent tariffs targeting a massive US$200 billion in goods won’t rise to 25 percent on January 1, as threatened by Trump, they will still remain in effect.
China has targeted US$110 billion worth of US imports for tariffs.
Trump also has warned he could slap punitive duties on the remaining US$267 billion in Chinese goods coming to the United States.
ANZ Research noted that there were “stark differences” in the public announcements by both sides.
The Chinese side — unlike the US — made no mention of the fact that the postponement of the tariff increase lasts only 90 days, and that they could be raised if upcoming trade talks don’t go well.
“We are unsure how serious the US administration is about the ‘ceasefire’ declaration,” ANZ Research said.
“The US has not promised it will not escalate the scale and coverage of the tariff measures thereafter.”
It noted also that China did not mention US calls for deep structural changes in its economic policies.
“These are deeply-seated issues which are difficult to resolve soon,” ANZ Research said
Western businesses routinely say that Beijing’s reform promises are not worth the paper they are printed on, accusing China’s government of perpetually delaying substantive reforms or actively backsliding.
Kenneth Jarrett, president of the American Chamber of Commerce in Shanghai, called the news out of Argentina “positive and encouraging.”
But he added: “We hope today’s positive news becomes something more permanent.
“For that to happen, the Chinese government must address the long-standing concerns of the American business community.”
He cited “market access restrictions, weak intellectual property rights protection, unfair industrial policies, the slow pace of economic reforms and lack of regulatory transparency.”
One of the biggest irritants in the US-China relationship is Xi’s stated plan to develop Chinese hi-tech prowess to a level rivalling the United States.
Trump has hit back at this so-called “China 2025” plan as a threat, accusing Beijing of stealing US technologies.
Crucially, the trade truce makes no mention of China’s tech ambitions.
“Trump knew that if he insisted on China giving up the 2025 plan, it would mean the breakdown of Sino-US trade negotiations,” Beijing-based consultant Hua said.