President Donald Trump speaks at the Values Voter Summit in Washington. Photo / AP
President Donald Trump speaks at the Values Voter Summit in Washington. Photo / AP
Donald Trump has hailed his weekend trade truce with China as "by far, the greatest and biggest deal ever made for our Great Patriot Farmers in the history of our country".
Taken at face value you'd be forgiven for thinking he'd just made an historic breakthrough in the 18-monthUS/China trade war.
Unfortunately, back in the real world, economic analysts have assessed it as an uneasy truce, with no progress on the underlying issues.
On Saturday (NZT) US officials announced that China had agreed to more than double its annual purchases of American agricultural products to as much as US$50 billion.
In return the US agreed to hold off on lifting tariffs (from 25 per cent to 30 per cent) on US$250b worth of Chinese goods this week.
Chinese officials did not acknowledge any details or even refer to a "deal" in their formal statement, Bloomberg reported.
The Ministry of Commerce said that "the two sides have made substantial progress" in a number of areas and "agreed to work together in the direction of a final agreement".
No documents were actually signed and the US still has in place tariffs on more than $360b worth of Chinese imports.
But at least it wasn't the total communication breakdown that markets feared.
Chinese Vice Premier Liu He leaves after a minister-level trade meeting at the Office of the United States Trade Representative in Washington. Photo / AP
Globally, shares have rallied on the news, which does provide a pathway for further talks.
Wall Street bounced in late trading on Friday (US time) and NZX-50 shot up almost one per cent this morning.
BNZ currency strategist Jason Wong said the so-called trade agreement, looked "more symbolic than substantial, and might be better described as simply an interim trade war truce".
"Anything can still happen on the trade front between now and year-end (and remembering the 15 per cent tariffs on nearly $100 billion of goods are still slated for December 15)," he said.
"All we would say for now is that the chances of a near-term re-test of the early October post-GFC lows on AUD around 0.6770 and NZD just above 0.62 have receded a little."
ANZ's Hong Kong based chief economist for greater China, Raymond Yeung, said tensions were unlikely to ease soon and "economic risks will linger as talks move through various stages.
"The Phase I agreement mainly covers agricultural purchases, tariff suspension and market access," Yeung wrote in a research note. "But core issues of technology transfer and national security still face high hurdles before a resolution in our view."
The big conflict around the ban on US companies trading with Chinese telco giant Huawei were not addressed in these talks.
"If you're China, you're pretty happy with the outcome," Arthur R Kroeber, founder of Beijing-based consultancy Gavekal Dragonomics, told the Wall Street Journal.
"China's negotiation position has always been, the longer you can extend the talks the better."
Economists say both the US and Chinese economies are slowing due to trade war pressure putting both nations under growing pressure to reach a meaningful deal.
Last year, US farm exports to China fell by 53 per cent to less than US$9.2b.
The White House has had to support US soy bean farmers with US$12b of farm subsidies.
China has GDP data due this week which is expected to show that output growth in the three months to September eased to 6.1 per cent, the slowest in almost three decades.
The International Monetary Fund, which holds its annual meeting in Washington this week, is still expected to cut its global growth forecast - for the fifth time since last October.
The next opportunity for further progress in resolving the trade war comes mid-November, when Trump is expected to meet Chinese president Xi Jinping at the Asia-Pacific Economic Cooperation (APEC) meeting in Chile.
