US and CHINA confirm Phase One trade agreement.

The Reuters News Agency this morning reports good news for financial markets.
The two superpowers signed thePhase One trade agreement back on January 15. Analysts today interpret the confirmation of the agreement positively: a step toward ending the tariff war, which has been going on for about two years now.

In fact, the agreement erases some of the tariffs imposed by the United States on imports from China. In turn, Beijing pledges, for the next two years, to increase imports of U.S. goods, worth at least $200 billion.

However, duties remain for China of at least $370 billion. Trump, however, has promised to lower the rate (from 15 percent to 7.5 percent) on a portion of Chinese goods.

US CHINA Phase One trade agreement
US CHINA Agreement

What effects for the US?

The United States, with this agreement, will benefit fromincreased Chinese imports for agri-food products. This is a point strongly desired by Trump who, in view of the upcoming presidential election, aims to gain the consent of American farmers and ranchers.

What effects for China?

China will have no further tariffs. According to Chinese news agency Xinhua, additional issues would also be among the points of Phase One:
the issue of intellectual property, trade expansion, technology transfers, financial services and even the exchange rate. One section of the agreement, in fact, would aim to prevent China from manipulating its currency for trade advantages.

US and CHINA confirm Phase One trade agreement at a very complex time full of uncertainty for the world economy. Beijing, according to the timing of the agreement, is behind on its obligations to purchase U.S. products. Yesterday’s phone call between representatives of the two world giants confirmed a detente in relations. We are faced with further reassurance to continue in the agreements made. The Chinese Ministry of Commerce also confirmed that the two countries had a “constructive dialogue” and to continue implementing Phase One of the agreement.

Now we are left to see how the markets will react to this news. Will the agreement hold or will there be other tensions that may cause it to falter?

What consequences for Europe?

In this situation, the U.S.-China agreement could bring disadvantages forEUROPE. In particular, the agribusiness sector may drop as CHINA will buy more from the U.S. market.
On the positive side for Europe, this détente benefits the entire world economy in terms of trade and thus more economic growth.

In addition, Europe would enjoy China’s promised structural reforms: an end to forced technology transfers and increased access to the Chinese financial services market.

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