After 19 months of a very tense trade war, China and the United States have managed to agree on a deal. Experts have confirmed that the trade war between the two powers has officially ended this Tuesday, 17 December.
However, some media such as Bloomberg have stressed that the deal might not be a long term solution.
As for the United States, US President Donald Trump has confirmed on Monday that “phase one” was almost completed, however, China said there was no deadline to finalize the deal.
So, what has been decided so far and what will happen next?
What was decided for the trade deal?
On Monday, CNBC’s Jim Cramer confirmed there was a “verbal agreement” between the United States and China, which “breathed new hope into Wall Street”.
About 19 months after the beginning of a trade war between China and the United States, the two countries announced on Monday that the “phase one” of negotiations was completed.
— Tyrone Vincent Jr. (@tyronevincentjr) December 17, 2019
On the one hand, Washington has decided to maintain tariffs on $370 billion of Chinese goods. On the other hand, China has confirmed it would buy $80 billion of US farm products in the next two years, partly because the country has been affected by the African Swine Fever that has skyrocketed pork prices to +110%.
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Just another chapter?
According to many experts interviewed by the Washington Times, it seems highly unlikely that China will be able to make such a purchase. “It will be very hard” to get to $40 billion, much less $50 billion”, US Trade Representative Robert E. Lighthizer reportedly said to the newspaper.
However, Lighthizer said that he is targeting to “nearly double US exports to China over the next two years”.
Does this headline look familiar?
It’s from two months ago.
Like then, what Trump announced today has yet to be finalized or signed.https://t.co/fmez1lUHhV
— Ben Gittleson (@bgittleson) December 13, 2019
Last but not least, the trade war has cost Americans more than $88 billion so far, reported the Tax Foundation, as well as an additional $28 billion that the administration gave to farmers.
This is twice the amount of what Barack Obama’s office gave to the auto industry right after the financial crisis in 2009.
How will it impact investments?
It looks like there are two sides to the story: US markets have reacted well – the Dow closed at 28,235.89, the S&P 500 at 3,191.45 and the Nasdaq reached 8,814.
But as for many, such as the Washington Post, this negotiation round might be just a “smoke-and-mirror”. In the Chinese newspapers, none of these measures would be taken under phase one and that both countries would have to agree on many more aspects to come to an agreement.