Trade War Update: Phase One Trade Deal, A Done Deal

After 18 months of tensions between the world’s two largest economic countries, the US and China officially made a significant milestone in their trade war, signing of Phase One on late Wednesday. Details of the deal include larger purchases of US goods by China & US removing China from their list of countries accused of manipulating currencies. 

However, the trade deal fails to excite. The market was practically muted following the news; must likely, investors locked into the market with expectations of the signing previously. The signage carried out by US President Donald Trump, along with Chinese Vice Premier Liu He, did manage to cheer market sentiment, with a considerable risk taken out of the market.

The next step would be further negotiations of the Phase Two trade deal, which is currently expected to be completed only after the US 2020 presidential election. Issues such as the rollback of tariffs and intellectual property rights are things supposed to resurface during the negotiation of Phase Two. Therefore, even with Phase One in place, the risk of re-escalating tensions between two sides remains a possibility. 

Furthermore, the market’s reaction towards the signing of Phase One was most likely overshadowed by fears of tensions re-escalating in the Middle East. The latest rocket attack on an Iraqi base hosting American troops has yet to be retaliated by the US, allowing the safe-haven gold to end Wednesday’s trading session with gains despite the Phase One signage. 

With one major economic event taking a break, market participants will focus on upcoming US economic data to see the impact the Phase One deal has upon the economies of the US and China. Besides that, investors will also look out for breaking news on further trade war updates and progress before making having any additional expectations on Phase Two.   

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