US and China trade war put ’on hold’ after progress made in negotiations resulting FTSE
FTSE 100 hits record high as Trump trade war fears ease as US pulled back from starting a trade war with China that could have sent shockwaves through the global economy.
Posted by Times News on Monday, 21st May 2018
A news report from Sky news that It’s agreed to put proposed tariffs on Chinese imports "on hold" after treasury secretary Steven Mnuchin said negotiations with the Chinese had progressed.
It means any moves by Washington and Beijing to impose tariffs on each other’s exports has been stalled.
Mr Mnuchin said that despite not getting China to reduce its overall trade surplus with America by a specified amount, US officials had thrashed out a number of commitments on a framework for reducing the deficit over time.
These include large increases in purchases of farm products and a doubling of purchases of US energy products.
Mr Mnuchin add: "We are putting the trade war on hold, right now, we have agreed to put the tariffs on hold while we try to execute the framework."
The FTSE 100 has surged to a new record high as investors welcome the announcement President Trump’s planned trade war with China is "on hold".
A series of factors helped push values up at the open on Monday - the index rising 0.5% and comfortably above the 7,800 point barrier in early trading which took a lead from Asia.
In a statement, the two sides said they had reached a consensus on taking effective measures to cut the US trade deficit in goods with China.
They said: "To meet the growing consumption needs of the Chinese people and the need for high-quality economic development, China will significantly increase purchases of United States goods and services."
The US is to send a team to China to thrash out the details.
Donald Trump has said he wants to see a $200bn (£148bn) reduction target.
Last year, the US had a record deficit with China in merchandise trade of $375bn (278bn) - the largest of any country.
Mr Trump campaigned in 2016 on a pledge to get tough on China and other US trading partners.
The president believes the massive US trade deficit with China is proof that Beijing is engaged in abusive trading practices and has outmanoeuvred previous administrations in Washington.
While the announcement signalled greater appetite for risk on stock markets, Brent crude oil prices - which hit $80 a barrel for the first time in three-and-a-half years last week - also rose.
A stronger dollar and newspaper speculation of a UK General Election in the autumn took its toll on the pound, which slid 0.5% to just below $1.34.
A weaker sterling since the Brexit vote has tended to boost share values because it bolsters the earnings of the FTSE 100’s dollar-earning constituent companies.
The prospect of a damaging trade war was a major factor in the market sinking below the 7,000 point mark in March.
Naeem Aslam, chief market analyst at ThinkMarkets, warned other events beyond the trade dispute could dampen sentiment ahead.
He wrote: "Both sides have retracted from their threatening behaviour and the US has suspended $150bn worth of tariffs on Chinese imports.
"Let’s see if the US hopes about China buying a substantial amount of US goods become true.
"European markets are picking up the momentum where they left off last week. It is a green day across markets - at least for now.
Editor: Jian Ping Sun