US and China agree trade war truce

Asian markets rose on Monday following news of a truce in the US-China trade war.

US President Donald Trump and Chinese President Xi Jinping struck a deal during their highly anticipated meeting at the G20 on Friday, with both sides agreeing to suspend hostilities for a 90 day period to allow for more dialogue, the Financial Times reports. The US will not proceed with tariff escalations scheduled for 1 January, and China agreed to open up its market and buy more US goods.

China will buy “very substantial” amounts of US agricultural products, President Trump said.

The news saw markets leap across Asia, with Hong Kong’s Hang Seng index and Shanghai Composite up more than 2% in early trading, while Japan’s Nikkei 225 rose more than 1%, the BBC reports. Dow futures also surged, according to CNBC.

However, optimism in the markets is more likely driven by relief than a sense of genuine progress in the trade tensions. Ceasefires are easily broken. Given the mercurial nature of the current White House administration and the determination of Beijing to give as good as it gets, some commentators had feared the outcome could have been much worse.

The real test will come over the next three months as both sides try to find a way to resolve fundamental differences which go well beyond trade and to the heart of their rivalry for global supremacy.