Published: Tue, October 15, 2019
Global News | By Blake Casey

Moody's: Potential US-China Trade Deal Implies Temporary De-Escalation in Tensions

Moody's: Potential US-China Trade Deal Implies Temporary De-Escalation in Tensions

On Monday, both Bloomberg and CNBC reported that the Chinese side was likely to want more talks this month to hammer out details before Xi Jinping agreed to sign the deal with one important goal being to get the U.S. to scrap tariff spikes planned for December.

China and the US held trade talks in Washington last week that ended with Trump saying both sides reached a "very substantial phase one deal".

The Trump administration said last week that China agreed to increase agricultural purchases, make unspecified adjustments to its intellectual property rules, and open its financial services market. Meanwhile, the U.S.is still scheduled to target another $160 billion in Chinese goods December 15, a move that would extend Trump's tariffs to virtually everything China ships to the United States.

Over the weekend, Chinese state media warned that Trump's celebration of a phase one deal was premature. But existing tariffs remain in place and officials on both sides said much more work is needed before an accord could be agreed. U.S. Trade Representative Robert Lighthizer said on Friday that Mr. Trump had not made a decision about the December tariffs.

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Beijing may send a delegation led by Vice Premier Liu He, China's top negotiator, to finalise a written deal that could be signed by the presidents at the Asia-Pacific Economic Cooperation summit next month in Chile, one of the people said. "We have a fundamental agreement. The Phase One Deal can be finalized and signed soon!" "The U.S. has definitely shown some good gestures but we shouldn't exclude the possibility of another flip-flop". The number of private firms rose 8.7 percent to 374,000, and they achieved a 5.1-percent trade growth. China responded in kind, and both sides have steadily taken additional measures to increase tariffs and retaliate against each other economically.

A few days later, China confirmed it had made no such phone calls to Trump.

"While a positive development, we are not absolutely certain that this marks the start of a clear de-escalation of the trade dispute", said Mark Haefele, chief investment officer at UBS Global Wealth Management. Geng Shuang, a foreign ministry spokesman, reiterated on Monday that both sides had made progress and said he hoped "the US will work with China and meet each other halfway".

China's exports fell at a faster pace in September while imports contracted for a fifth straight month, pointing to further weakness in the economy and underlining the need for more stimulus as the Sino-U.S. trade war drags on. Yields on US 10-year Treasury notes rose to 1.7530%.

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