uploads/2019/09/Trump-China-tariffs-1.jpeg

China Tariffs Delayed: Are Trump and Jinping Friends Again?

By

Updated

  • On Wednesday, President Trump announced a delay in the China tariffs. The tariffs, scheduled for October 1, will come into effect on October 15.
  • President Trump said that he delayed the China tariffs due to a request from China Vice Premier Liu He. Notably, China removed some US goods from its tariff list on Wednesday.

Trump delays China tariffs

On Wednesday, President Trump announced that the China tariff hike, which was scheduled to take effect on October 1, will be delayed until October 15. President Trump said that the decision was a  “gesture of goodwill” following a “request” from China’s Vice Premier Liu He. China will be celebrating its 70th anniversary. China took some US goods off its tariff list a few hours before President Trump’s announcement.

The US delayed the China tariffs in August. The Trump administration delayed tariffs on products like phones and computers until December 15. They don’t want to disturb holiday shopping. Several US companies like Apple (AAPL) and Amazon (AMZN) oppose the China tariffs. Apple CEO Tim Cook spoke to President Trump about how the tariffs have a negative impact on the company’s business.

Are Trump and Jinping friends again?

President Trump delaying the tariffs is a positive development for equity markets. Last month, there was a serious escalation in the US-China trade war. Both of the countries announced fresh rounds of tariffs in August. Also, the US designated China as a “currency manipulator.” China stopped buying US agricultural products. At one point, President Trump addressed President Jinping as an “enemy.” In the past, President Trump referred to President Jinping as a “friend” despite all of the trade war noise.

China tariff delay is positive for markets

The delay in the China tariffs and the de-escalation in the trade war are positive for markets. Notably, the delay is also positive due to sagging global growth. President Trump’s tariffs have taken a toll on China’s economy. China’s exports to the US have also fallen sharply over the last few months. The US economy isn’t immune to the trade war. US economic growth has also slowed down. Last month’s PMI surveys showed that trade uncertainty impacts hiring decisions. The fears came true after the release of the August jobs data. Last month, the US economy added fewer jobs than expected.

Impact on both countries

Investors might not agree on the extent to which the tariffs and trade war have a negative impact on the US and the Chinese economies. However, tariffs impact consumers in both countries. China’s slowdown isn’t necessarily a “win-win” situation for US companies or the economy. Previously, companies like Apple and NVIDIA (NVDA) warned that China’s slowdown hurts their earnings. President Trump’s China tariffs increase the costs for companies, like Amazon, that procure from China. Given the low margins, many companies wouldn’t have an option except to pass on higher costs to consumers.

Over the last 18 months, there have been several episodes of de-escalation in the US-China trade war. However, the goodwill didn’t last long. There were new tariffs and escalations. Will this time be different? With the upcoming presidential election, the Trump administration would like to secure a trade deal with China. The Trump administration might not want to burden US consumers with more China tariffs.

More From Market Realist