13 to 19 January: Let Phase Two commence!

China’s Vice Premier, Liu He, headed to Washington for the signing of the Phase One Trade Deal. This represents the first concrete de-escalation of tensions between the US and China in nearly two years. The agreement covered items spanning intellectual property protection, market access openings, currency and merchandise trade. The US also stated that current tariffs would be maintained, whilst China committed to a number of large purchases from the US (including manufactured goods, agricultural products, energy and services amounting to USD 200bn in total). As a prelude to the meeting, the US Department of the Treasury issued its semi-annual currency report, within which it rescinded its designation of China as a currency manipulator. The US justified its decision based on the recent strengthening of the renminbi against the US dollar, which has occurred amid firming investor sentiment in advance of the trade accord. In our opinion, the deal’s scope could help business sentiment and consumer confidence stabilise and consequently reduce the uncertainties that have weighed on economic growth prospects throughout 2019. However, since tariffs remain in place, a sharp bounce in either country’s GDP growth in 2020 is unlikely. Now that Phase One is behind us, let Phase Two commence!

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