November 6, 2019

China Economic Update: November 2019

Trade truce – US and China reach an agreement, but trade outlook still uncertain.

Key highlights

  • The US-China trade relationship has steadily deteriorated over the past eighteen months, as increasing trade barriers have negatively impacted the global economy. However, it appears that the two sides are close to a partial deal after talks in October that could begin to address the issues that ignited the trade war. The situation remains fluid – with negotiations apparently continuing ahead of a formal signing of the deal – and there remains some way to go around more complicated terms sought by the United States around intellectual property and subsidies.
  • Observers were quick to note that the measures China agreed to in this deal were essentially identical to those proposed in earlier rounds of negotiations, suggesting that negotiators from both sides were keen to make some progress, following an extended series of unsuccessful talks. This increased urgency may reflect increasing signs of the impact of the trade war on both countries, particularly pressing from a US perspective ahead of the 2020 Presidential election.
  • A key question mark going forward is the status of US tariffs scheduled for 15 December. Chinese officials are seeking to have them suspended as part of the deal, and the US Treasury Secretary Steven Mnuchin has stated he expects them to go ahead if the deal is not concluded. China may seek to roll back the most recent tariffs, introduced at the start of September. However, it is unclear what the US President’s view on this is (with trade policy sitting in the President’s hands).

For further details, please see the NAB China Economic Update – November 2019