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Asia stocks rallied Monday on the news that the United States and China, the world’s two largest economies, would not impose any new tariffs during a 90-day grace period, during which the two sides are to negotiate a detailed agreement.
In early trading Monday China’s main market index (the Shanghai Composite) jumped 2.7 percent and the Hang Seng in Hong Kong added 2.8 percent.
Japan’s Nikkei 225 index climbed 1.4 percent.
The U.S. pre market indexes – Dow and S&P futures contracts – were 1.9 percent and 1.8 percent higher respectively, indicating a strong start on Wall Street once the New York Stock Exchange opens at 9:30 a.m. Eastern Standard time.
The U.S. and China had agreed to a small truce in their escalating trade war after a meeting between presidents Donald Trump and Xi Jinping following the G-20 summit.
Trump, speaking to reporters on Air Force One after the plane departed Argentina, said his agreement made over dinner with Xi, will go down “as one of the largest deals ever made. … And it’ll have an incredibly positive impact on farming, meaning agriculture, industrial products, computers — every type of product.”
“China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40 percent,” Trump said on Twitter late Sunday.
Monday China’s ministry of foreign affairs said the Chinese and U.S. presidents had agreed to work towards removing all tariffs.
Trump agreed that he will leave the tariffs on $200 billion worth of Chinese products at the 10 percent rate, and not raise it to 25 percent, for now, as he has threatened to do come January 1, according to a White House statement.
“China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial and other product from the United States to reduce the trade imbalance between our two countries,” said White House Press Secretary Sarah Sanders. “China has agreed to start purchasing agricultural product from our farmers immediately.”
Trump and Xi also “agreed to immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture,” according to the White House statement. “Both parties agree that they will endeavor to have this transaction completed within the next 90 days. If at the end of this period of time, the parties are unable to reach an agreement, the 10 percent tariffs will be raised to 25 percent.”
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At the dinner, Xi also agreed to designate fentanyl as a controlled substance, meaning that people selling the powerful opioid to the United States will be subject to China’s maximum penalty under the law.
The White House is calling the Chinese president’s decision a “wonderful humanitarian gesture.”