Markets rally but questions remain on specifics of US-China trade truce

Global markets rallied on Monday on the back of a trade truce agreed by US president Donald Trump and Chinese leader Xi Jinping, though major questions remained about the specifics of the deal.

Amid mixed messages from Beijing and Washington about the substance of the agreement reached at the G20 summit in Buenos Aires, a combative Mr Trump hailed the agreement in a series of tweets on Monday.

"My meeting in Argentina with President Xi of China was an extraordinary one. Relations with China have taken a BIG leap forward! Very good things will happen," he said, apparently inadvertently referencing the "Great Leap Forward" of China's cultural revolution which is widely considered to have led to the deaths of millions of people.

In a subsequent tweet, Mr Trump said farmers would be a “very BIG and FAST beneficiary of our deal with China”.

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“They intend to start purchasing agricultural product immediately. We make the finest and cleanest product in the World, and that is what China wants. Farmers, I LOVE YOU!”

Mr Trump and Mr Xi agreed on Saturday to a 90-day pause in the ongoing trade war between the two countries, with the US president agreeing not to increase tariffs on $200 billion worth of Chinese goods to 25 per cent from January 1st.

Mixed messages

While negotiations will commence in Washington this month, details of the agreement remained unclear.

Mr Trump said that China had agreed to reduce and remove tariffs on US cars, but his chief economic adviser Larry Kudlow said during a conference call with reporters on Monday that there had been no specific agreement on this, though he said he believed the commitment had been made.

Mr Kudlow, however, hailed Saturday’s meeting between the two leaders as “an enormous event”. While conceding that the US had been “down this road with China” in the past, he said that this agreement covers “so much ground in so much detail – we’ve never seen this before”.

In particular, he noted Mr Xi’s engagement with the detail of the negotiations, which he said was “quite unusual for a head of state”. Highlighting the chemistry between Mr Trump and Mr Xi, he said: “I think personal relationships matter.”

Meanwhile, several members of Congress raised questions about the substance of a new trade agreement between the US, Mexico and Canada. The USMCA deal – a revamped version of Nafta, the North Atlantic Free Trade Agreement introduced under Bill Clinton's presidency – was signed by the leaders of the three countries at the G20. But it still needs to be ratified by national parliaments.

Senator Sherrod Brown of Ohio was among those who slammed the deal, arguing that the USMCA "doesn't live up to the promise the president said of a renegotiated Nafta".