Trade War Update: Phase One Trade Deal In Place

The long-awaited signing of Phase One trade deal between US and China is just around the corner, after US Trade Representative, Robert Lighthizer, stated that the translation of the Phase One deal is near to completion. The deal was scheduled to be signed on Wednesday in Washington by US President Donald Trump and Chinese Vice Premier Liu He. 

Prior to Lighthizer’s statement was the announcement from US Treasury Department on removing China from a list of countries considered to be manipulating their currencies. Instead, China will be placed on a monitoring list for their currency practices. According to US Treasury Secretary Steven Mnuchin, China made enforceable commitments to refrain from competitive devaluation while also agreeing to be more transparent in publishing relevant information related to exchange rates. 

On the trade front, Mnuchin also stated in an interview that Beijing has agreed to purchase up to $200B (billion) worth of US goods over the span of two years. In an official report from US media company Politico, the $200B worth of goods will be allocated into $75B in manufactured goods, $50B in energy, $40B in agriculture and $35B-$40B in services.

Nevertheless, the signing of the Phase One trade deal will without a doubt provide large impact onto the market. A significant amount of goods purchases will provide a strong support for the US economy and also its manufacturing sector in the midst of global recession. Whereas for China’s side, elimination of further tariffs would also provide their manufacturing sector some room to breath. 

Just a few days after the de-escalation of tensions from the Middle East, market sentiment turned positive following the updates of the trade deal, boosting investors’ risk appetite as they sell-off their safe-haven assets. Precious gold fell back towards its support zone near $1,530 while pair of USD/JPY rose to its highest level since May 2019 near 110.00.     

Photo Credit: www.thenational.ae