EDITORIAL: US-China trade détente has to pass test of time
The last major round of talks collapsed in May after a flurry of tweets from volatile Trump
Investors worldwide cheered the trade detente between China and the US, but they probably would be wise to curtail their expectations.
Domestic stocks, bonds and the rand gained on Monday as a thaw in the trade dispute between the US and China averted a threat to the global economy and boosted demand for risky assets from Asia and Europe to Wall Street.
The truce hashed out on the sidelines of the G20 summit in Osaka, Japan, on Saturday between US President Donald Trump and Chinese counterpart Xi Jinping means they will resume talks that collapsed in May.
Under the détente, Trump will hold off on new tariffs he had threatened to levy on about $300bn of Chinese imports in exchange for China buying a “tremendous amount” of additional American agricultural products.
There are still some booby traps and investors should probably be judicious in their exuberance.
Perhaps the biggest step forward is Trump’s concession that US companies could keep selling products to Huawei, China’s telecoms equipment maker, which the US government has put on an export blacklist.
It’s a breakthrough, albeit a mini one, for the increasingly tense relationship between the two, but it is still not entirely clear if it will result in a deal. There are still some booby traps and investors should probably be judicious in their exuberance.
The 2019 G20 summit ended much the same way as the one in Buenos Aires, Argentina, seven months ago: With Trump agreeing to hold off on hiking levies on Chinese imports while Beijing pledged to purchase a “very substantial amount” of US farm products, and a return to the negotiation table. Those talks abruptly ended in early May.
It’s a reminder that there is no guarantee that the latest truce will stick.
Trump’s volatile nature is potentially another booby trap for investors. When the last major round of talks collapsed in May, Trump had been punting a signing ceremony for what he called an “epic” trade deal with China. It was all undone in a flurry of tweets.
True, the prospects of reaching a deal are better than they were a week ago. It would have, however, been a much more realistic expectation had the two countries taken back the tariffs that have already been imposed.
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Though global trade topped the agenda at the summit, leaders of the world’s biggest economies also pushed back against the Trump administration’s attempts to undermine international efforts for environmental protection.
In a joint statement at the two-day summit, the grouping — except the US, which withdrew and attempted at the weekend to remove references to reducing carbon emissions from the final statement — reaffirmed its commitment to the full implementation of the Paris Agreement.
In that landmark accord 200 countries broadly agreed to a set of rules to reduce global gas emissions, a crucial step in limiting the global average rise from pre-industrial temperatures to below 2C.
It’s an encouraging development that 19 countries, including SA, “held the line” on climate change, brushing aside Trump’s challenge and efforts to convince several states, including Brazil and Turkey, to join his government in pulling out of the historic agreement.
The G20’s adoption of the “Osaka Blue Ocean Vision” aimed at cutting additional plastic trash leaking into the ocean to zero sounds like a cause for celebration, too. But it failed to confront the heart of the problem — the surging output of single-use plastics.
According to the World Bank, the world produced more than 240-million tonnes of plastic waste in 2016. About 8-million tonnes of that enters the ocean annually. China and Indonesia are the biggest offenders, a study in the journal Science shows.
The problem is waste management is not enough. The world needs to take decisive action in curbing the production of single-use plastics, including plastic forks and knives, shopping bags, Styrofoam, and plastic takeaway containers.
Apart from the target being unreasonably far away in 2050, it is also disheartening that the group’s proposed steps were voluntary rather than legally binding. Surely this cannot guarantee their effectiveness.