Donald Trump’s recent decision to extend a truce in the ongoing trade war with China has led to a significant rally in global stock markets. On November 10, 2023, the US President signed an executive order postponing an increase in tariffs on Chinese goods, which has raised optimism among investors. In response, China announced that it would suspend additional tariffs on US imports for another 90 days.
Following this announcement, markets in Japan and Australia experienced notable gains. The Tokyo Stock Exchange’s Nikkei share index surged by as much as 2.5%, reaching a peak of 42,867.69 points on Tuesday. Similarly, the Australian ASX 200 index climbed by 0.14%, hitting a new high of 8,828.67. The positive momentum in Australia was bolstered by the Reserve Bank of Australia’s decision to cut its main interest rate to a two-year low of 3.6%.
In China, the Shanghai composite index increased by 0.5%, reflecting investor confidence. However, Hong Kong’s Hang Seng index remained largely unchanged, indicating a more cautious outlook in that market. Investors are hopeful that negotiators from both the US and China will be able to finalize a trade agreement during this period of reduced tariffs.
Trump’s administration has previously threatened to impose tariffs as high as 245% on Chinese imports, while China has countered with threats of retaliatory tariffs reaching 125%. Currently, US exports to China face tariffs of approximately 30%, while imports from China are subject to a baseline tariff of 10%, along with an additional 20% tariff linked to allegations of fentanyl smuggling.
Economists express concerns that the trade conflict could have serious implications for the global economy. They warn that ongoing tensions may lead to increased costs, disrupt supply chains, and ultimately result in a decline in international trade.
As these developments unfolded, oil prices also saw an uptick on Tuesday. Brent crude futures rose by 0.4% to $66.90 a barrel, while US West Texas Intermediate crude futures increased by 0.4% to $64.20. The rise in oil prices is attributed to growing hopes that the trade dispute could begin to de-escalate.
The extension of the trade truce signifies a potential shift in relations between the US and China, with both nations exploring avenues for compromise. As markets react positively, the focus now turns to whether negotiators can capitalize on this momentum to achieve a lasting agreement.
