US stocks surged on Monday after the treasury secretary, Steve Mnuchin, said the prospect of a trade war was “on hold” following an agreement to suspend tariff threats.
In early trading in New York, the Dow Jones was up more than 300 points, or 1.2%, with Wall Street’s S&P 500 and Nasdaq indexes also making gains.
The markets were buoyed by comments made by the treasury secretary and White House top economic adviser, Larry Kudlow, who both said the US had reached an agreement with a visiting Chinese trade delegation to ease trade imbalances between the world’s two largest economies.
Despite the vagueness of the terms, Mnuchin put a positive spin on the talks, telling CNBC on Monday they had already produced tangible benefits.
“I think we’ve made very meaningful progress. Now it’s up to both of us to make sure that we can implement it.”
The agreement, or truce, aimed at reducing the US’s annual $337bn trade deficit with China was reached after an announcement from Beijing that it would “significantly increase” purchases of American farm goods, energy and other products and services.
“We want China to open up markets, lower tariffs, lower non-tariff barriers, give us a chance. We also want China however to change their behavior with respect to technology transfers and also the theft of intellectual property rights,” Kudlow told CBS on Sunday.
However, the two sides avoided specifically addressing underlying American complaints or systemic trade imbalances that led to the Trump administration’s demand on China to increase purchases by $200bn annually – a specific commitment notably omitted from Saturday’s joint communique.
After Mnuchin said on Sunday that the two sides were “putting the trade war on hold”, China issued a statement overnight saying it could not guarantee that renewed trade tensions with Washington could be avoided.
“Given the increasing interaction between the two countries, we cannot assure you they will not encounter more frictions or disputes in the future,” advised Chinese foreign ministry spokesman, Lu Kang, at a briefing.
“If the two governments can reach an agreement which is acceptable to both sides, the two governments should certainly abide by it,” Lu added.
Shi Yinhong, director of the Center for American Studies at Renmin University in Beijing, told the Associated Press he doubted the truce would be enduring.
“I don’t think the truce will last very long,” Shi said. “The antagonism in trade will ebb and flow in China-US relations in the long term.”
Analysts at DailyFx, a forex advisory service, said the latest US-China trade skirmish “may ultimately prove to be another stepping stone on the path to deeper global trade integration”.
But it cautioned that “a period of discomfort may be in the immediate future; even history shows that the path to trade liberalization hasn’t been a straight line”.
In the joint statement, the delegations said they would keep talking over the summer.
But Mnuchin insisted on Sunday that despite making “meaningful progress”, the US would be free to impose tariffs if Beijing did not live up to its commitments. “We have agreed to put the tariffs on hold while we try to execute the framework,” he said.
