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Economics & Markets

G20 delivers a glimmer of hope in the US-China trade war

By Dr Shane Oliver
Head of Investment Strategy and Economics and Chief Economist, AMP Capital Sydney, Australia

A big concern for investors throughout this year has been the escalating trade war between China and the US. So investors were closely watching the meeting between US President, Donald Trump, and Chinese President, Xi Jinping at the recent G20 (Group of Twenty) summit.

Investors were hopeful – though sceptical – that something positive would happen. And as it turns out, the outcome of that meeting has been quite positive, particularly in the short-term.

Markets find the positives

China and the US agreed to put further tariff increases on hold for now, at least for 90 days while they negotiate a whole bunch of other issues such as forced technology transfer, the protection of intellectual property, cyber hacking and tariffs. Most of those issues weren’t previously on the table.

Markets across the world were looking for some good news and reacted positively, at least initially, pushing global stocks higher. In Australia, the ASX200 surged 1.8% - the best day in two years.

Just a truce?

Yet already people are questioning what happens from here. Obviously, March 1, when the 90-day period ends, becomes a milestone date.

Others are discounting what happened at the G20, saying this is just a temporary truce and that after March 1 will we back into a trade war all over again.

Personally, I think the outcome from the G20 is positive and gives us cause for some optimism. There are a couple of reasons for this.

Firstly, as it occurred between the two presidents directly, this deal suggests buy-in at a high level this time around.

And secondly, the Chinese seem to have given some ground by agreeing to negotiate on issues such as intellectual property theft and forced technology transfer, which they haven’t wanted to discuss in the past.

That’s a pretty good sign they’re focusing on issues the US is concerned about.

So, in that sense, my feeling is that some confidence that this time around there might actually be progress is warranted.

Not going back

Early in 2018, the risk of a trade war seemed a bit academic. But the situation escalated quickly and the trade war is already impacting confidence in China, and the US where it is weighing on capital spending by companies.

By the time we get to March 1 next year, I believe it’s highly likely that either the US will agree to further delays in the imposition of more tariffs, or they will have come to some sort of agreement with China that ultimately leads to a complete de-escalation of the trade war.

So while there’s still a lot of uncertainty about what might happen in March, what we saw at the G20 was good progress and give us some sign that we won’t see a return to the trade war that started to emerge in 2018.

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Important notes

While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455)  (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.


This article is not intended for distribution or use in any jurisdiction where it would be contrary to applicable laws, regulations or directives and does not constitute a recommendation, offer, solicitation or invitation to invest.

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