Trump Says US and China Discussing Potential Trade Agreement, Markets Rally

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Last Friday morning, markets rallied upwards on hopes that the trade war of the United States with China might already be easing.

The Stoxx Europe 600 – which tracks the biggest firms in Europe including the FTSE 100 – increased by one percent while Asian stocks also rallied.

The Hang Seng Index of Hong Kong rose by more than four percent and the Shanghai Composite of China and Nikkei of Japan both rose by approximately 2.5 percent.

It comes after Donald Trump, the President of the United States of America, posted on Twitter to relay a “long and very good conversation” with President Xi Jinping, his China counterpart.

He tweeted: “Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina. Also had a good discussion on North Korea!”

It was also reported by Bloomberg that Trump is hoping to sign a trade agreement with China at the meetings of the G20. Citing anonymous sources, he has also asked officials to start drafting the possible terms.

It comes after China and the US have imposed tariffs on each other’s exports that are worth billions of dollars.

The United States has hit over $250 billion of exports from China with tariffs this year while warning of more to come, while China has countered with tariffs of its own on $110 billion of goods from the United States.

Meanwhile, the United States has prohibited companies from supplying equipment to Fujian Jinhua, a Chinese chipmaker, because of concerns over national security.

The rebound last Friday comes in spite of a lack of detail of what a trade deal between the US and China might look like. However, after an October in which global stocks endured a horror show sell-off, with the tech stocks of the US losing $172 billion in a single day.

The senior market analyst at foreign exchange firm Oanda, Craig Erlam, welcomed the good news.

He stated: “Investors will be feeling much more at ease now, although it’s still too early to call the end of the sell-off.”

He added: “Naturally though, all this talk of a trade deal between the world’s two largest economies that are currently engaging in a tariff tit-for-tat, is a supportive factor that could prevent another slump.”

He, however, sounded a sceptic note regarding the timing of the tweet of President Trump, which comes less than a week prior to the midterm elections in the United States.

Erlam noted: “Trump has been a cheerleader of the markets since his election victory and the timing of the sell-off will have really frustrated him, even if the declines we’ve seen pale in comparison to the post-election rally.”

He continued: “It would seem this call comes at a very opportunistic time as it stops the rot in the markets and gives the impression that after months of tariffs and fiery rhetoric, progress is being made on improved trade terms with China. It’s a win-win for Trump. I just hope the cynic in me is wrong and this is an important first step towards better trade relations between the two.”