United States President Donald Trump announced on Twitter that he will hold off increasing tariffs on $200 billion worth of Chinese products and have a meeting with China’s President Xi Jinping at Mar-a-Lago resort in Florida:
“I am pleased to report that the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues.”
“As a result of these very productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!”
After the announcement, the Australian dollar gained 0.4 percent to $0.7157. Chinese Yuan appreciated by 0.3 percent to 6.6806 yuan against the dollar while the Japanese Yen dipped 0.1 percent to 110.75 yen to the dollar.
The euro increased 0.1 percent to $1.1346. There was no significant movement with dollar index against a basket of six major currencies and settled at 96.446.
Trump’s sudden U-turn on imposing higher tariffs wasn’t a total surprise according to Shinichiro Kadota, senior forex and rates strategist at Barclays in Tokyo:
“So I expect the market reaction should be somewhat limited and that the focus would shift back to global economic fundamentals.”
Gregory Daco, chief US economist at Oxford Economics, shared a similar opinion:
“We had anticipated such a delay and believe a handshake agreement in which China will promise to import more agricultural products, work towards a stable currency and reinforce intellectual property rights protection will be achieved in the coming weeks.”
“However, we don’t foresee a significant rollback of existing tariffs, and see underlying tensions regarding China’s strategic ambitions, its industrial policy, technological transfers and ‘verification and enforcement’ mechanisms remaining in place.”