US and China Extend Tariff Truce by 90 Days, Averting Tariffs Hike

In a significant step toward deescalating the trade tensions between the world's two largest economies, US President Donald Trump has signed an executive order to extend the trade truce with China for another 90 days, averting a potential hike in tariffs. The extension was signed just hours before the previous agreement was about to expire.

Background and Context

This move marks the second time that the US president has extended the deadline for higher Chinese tariffs. The pause first reduced the American tariff on Chinese products to 30%, while Beijing's reciprocal tariffs on American products remained at 10%. The decision to extend the truce came as both nations continued to negotiate their trade differences, with the potential to lead to a summit between President Trump and Chinese President Xi Jinping later this year.

Key Developments

US President Donald Trump announced the extension of the tariff truce on Monday. “I have just signed an Executive Order that will extend the Tariff Suspension on China for another 90 days. All other elements of the Agreement will remain the same,” Trump wrote on his Truth Social platform. The deadline has now been extended until mid-November.

In response to Trump's announcement, the Chinese Commerce Ministry also revealed that Beijing will suspend additional tariffs on US goods for the same period. The extension buys time for the two countries to work out some of their differences, which could clear the way for a potential summit.

Implications and Reactions

The extension of the truce has been met with positive reactions globally, spurring a global stock market rally. Bourses in Australia and Japan hit record highs as hopes grew for a trade deal within the extended 90-day pause.

This extension also provides a crucial time for the seasonal autumn surge of imports for the Christmas season at lower tariff rates. However, it also leaves trade relations fragile, as any failure to reach an agreement within this period could see duties shoot back to the escalated levels.

Conclusion

The extension of the tariff truce by both the US and China has temporarily averted a trade showdown between the world's two biggest economies. Trump cited China's significant steps toward remedying non-reciprocal trade arrangements and addressing the concerns of the United States relating to economic and national security as the reason for the extension. As the world watches, the two nations now have until mid-November to resolve their differences and potentially cement a more permanent trade agreement.