After a two-hour meeting on the sidelines of the G20 summit in Argentina, Donald Trump and Xi Jinping have agreed to a temporary ceasefire on tariffs scheduled to kick in on 1 January.

By Daniel Herborn

Posted on December 3, 2018

“President Trump has agreed that on January 1, 2019, he will leave the tariffs on $200 billion worth of product at the 10 percent rate, and not raise it to 25 percent at this time,” a statement from the White House read.

In return, China agreed to purchase a “very substantial” quantity of agricultural products and energy from US producers.

In the wake of the news, Dow futures climbed more than 400 points and the S&P 500 futures was up 1.5%.

US and China will continue to negotiate while the tariff rise is frozen

The two countries will also continue negotiating ongoing disagreements on intellectual property, cyber theft, technology transfer and agriculture over the next 90 days.

The tariff rise will go ahead if the two nations cannot strike a deal during the negotiation period.

“This was an amazing and productive meeting with unlimited possibilities for both the United States and China,” Trump said in a statement.

“It is my great honour to be working with President Xi.”

A report in Chinese state media said the meeting ended with an “important consensus” and would set the tone for “Sino-US relations in the near future.”

“The principal agreement has effectively prevented further expansion of economic friction between the two countries and has opened up new space for win-win cooperation,” said Chinese Foreign Minister Wang Yi.

“If it happens it goes down as one of the largest deals ever made,” Trump told reporters on Air Force One on his way back from the summit. “It will have an incredibly positive impact on farming, meaning agriculture, industrial products, computers, every type of product.”

Trump on the G20 summit: A “great success”

China also expressed a willingness to revisit the rejected Qualcomm bid to buy NXP Semiconductors for US$44 billion. The Chinese regulator had quashed that deal in what was widely seen as a decision coloured by the trade war.

Trump hailed the G20 summit as a “great success” but the joint declaration the attending nations signed noted the current multilateral trading system has “room for improvement”. The statement did not explicitly condemn isolationism but supported reform to the World Trade Organization.

Trump had intended to hold a press conference after the event, but this was postponed following news of the death of former US President George H.W Bush.

Writing on Twitter, Australian Minister for Trade, Tourism and Investment Simon Birmingham, cautiously welcomed reports of the temporary halt in tariff rises.

“If accurate this will be an important and welcome breakthrough that reduces the threat to global economic growth,” he wrote.