Stocks jump on news of US-China trade truce

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A cease fire is better than a trade war, and stocks jumped higher after the United States and China said they would stand down on further tariffs and continue talking about their differences.

Dow futures soared nearly 500 points, or about 2%, on Sunday night. In Australia, the ASX market was up 1.4%, while Japan’s Nikkei was up a little more than 1%.

President Donald Trump and his counterpart Chinese leader Xi Jinping agreed on Saturday to a temporary truce in the escalating trade war between the two countries.

President Trump agreed to maintain the 10% tariffs on $200 billion worth of Chinese goods, and not raise them to 25% “at this time” ahead of a January 1 deadline, according to a White House statement.

In exchange, China said it was willing to purchase a “very substantial” amount of agriculture, energy and other goods from the United States to help reduce the trade imbalance.

The outwardly positive agreement between the leaders to halt further escalation in tariffs and continue negotiating to reduce trade imbalances was seen by many US-China experts as another punt by the two countries in a year-long trade negotiation that leaves unresolved deep issues between the two countries.

The agreement sets up yet another deadline by the Trump administration to broker a deal with China, within 90 days, to address top US concerns like forced technology transfer, intellectual property and cyber-theft.

“It was a postponement,” said Craig Allen, president of the US-China Business Council. “It is certainly not any resolution of any issue. But it’s better than the situation we had before. Now we wait and see.”

Ian Shepherdson, chief economist at Pantheon Economics, had a similar assessment — saying in a commentary that the deal was a “deferment of disaster rather than a fundamental rebuilding of the trading relationship between the US and China.”

“The lesson of Saturday night is that both sides want to avoid catastrophe, but neither is hurting badly enough—yet—to make substantial immediate concessions,” Shepherdson wrote.

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