Stocks set to rise after U.S., China cool trade tensions

U.S. financial markets were poised to rise Monday after President Donald Trump and Chinese President Xi Jinping agreed to a truce in the countries’ ongoing trade war. Mr. Trump agreed to hold off on a sharp hike in tariffs on Chinese imports that had been scheduled to take effect Jan. 1. In return, the People’s Republic committed to buy more American farm, industrial and energy goods and tighten restrictions on sales of fentanyl, among other concessions. 

The U.S. will postpone until March 1 a plan to raise tariffs on $200 billion worth of Chinese goods from 10 percent to 25 percent, with Washington set to resume talks with Beijing in hopes of a longer-term deal on trade. 

“This agreement at least postpones further escalation in the trade war, avoiding an outcome that would have roiled financial markets,” Eurasia Group analysts wrote in a research note. “That appears to have been a key consideration for Trump, who became more open to a deal as US stock markets weakened in October and November.”

In a late Sunday tweet, Mr. Trump also said China has “agreed to reduce and remove” tariffs on U.S.-made cars, although Chinese officials have yet to confirm that claim. 

Stock futures pointed to a lift in U.S. markets ahead of the start of trade. Asian and European markets rose sharply after news of the cease-fire on trade at this weekend’s G-20 summit in Buenos Aires, Argentina. 

Still, analysts said it remains to be seen if the sides are able to forge a pact on trade.

“While the Xi-Trump dinner has clearly improved the tone of the U.S.-China relationship for the time being, and we would expect an initial positive market reaction, the ‘pause’ prolongs the period of uncertainty around the eventual structure of trade relations between the two countries,” Goldman Sachs analysts said in a report. “The specter of higher and broader US tariffs remains, and the underlying issues clouding the trade relationship are deferred to further negotiations.”