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US | Asia-Pacific

Trade Truce at G20 Summit

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At the G20 Summit, Presidents Trump and President Xi said the US would hold off on raising incremental new tariffs, while US and Chinese representatives resume work on trade negotiations where they broke off in early May. This outcome was largely in line with market expectations.

 

Trump also said the US would “keep selling” products to Chinese telecom Huawei, but in areas where these sales do not pose a national security problem. The Huawei discussion would “have to wait for the end of negotiations,” Trump said, according to press reports.

 

The US is likely to press on eventually with trade confrontations elsewhere, with the EU in particular. Trade friction between the US and many others could remain part of the outlook which has slowed US investment growth and weakened business confidence.

 

 

Over the longer-term, much larger issues loom over relations between the world’s two largest economies. From the South China Sea, to North Korea, to the Straits of Taiwan, China may continue to exert increasing influence. Regardless of today’s US-China trade tensions, future agreements over issues such as intellectual property, digital privacy, access to China’s markets, and currency policy could be increasingly difficult to achieve.

 

What does this rivalry between the ‘G2’ powers mean for global investors? Citi analysts believe that as long as no direct military confrontation erupts between the US and China, there may be numerous long-term attractive investment opportunities over the coming years. Increasing portfolio quality may also make portfolios more resilient and able to withstand the unanticipated effects of political uncertainty.

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