Markets surged on Monday following the news of a ceasefire in the enduring trade dispute between the U.S. and China.
The S&P 500 hit an all-time high of 2,977.86 in early trading hours and the Dow Jones Industrial Average rose by 1.06 percent. China and the U.S. agreed to restart trade negotiations, which collapsed last month, over the weekend at the G-20 Summit in Osaka, Japan.
“We will be continuing to negotiate and I promised, for at least for the time being, we are not going to be lifting tariffs against China,” Trump said on Saturday, following a meeting with Chinese President Xi Jinping.
A spokesman for the Chinese foreign ministry said on Monday that the decision to restart talks was based on “equality and mutual respect.”
“This is a good-faith gesture that both sides want an agreement, and they want to get one soon,” Tori Whiting, a trade economist at the Heritage Foundation, told Cheddar, adding, however, that it is still too early to “know what the devil is in those details.”
President Trump has said that in addition to not imposing additional tariffs, the U.S. will ease restrictions on Huawei — the Chinese telecommunications giant that the U.S. has deemed a national security threat — in exchange for China agreeing to buy agricultural goods from the U.S.
The U.S. tariffs that are currently imposed on roughly $250 billion worth of Chinese imports will remain in place. The Trump administration began levying tariffs against China over a year ago in an effort to punish Beijing for unfair trade practices.
In the U.S., the aggressive tariff strategy has been widely criticized for ultimately hurting U.S. businesses and raising prices for consumers.
“Those tariffs are taxes on the American people,” Whiting said while praising the decision not to impose more tariffs. “We shouldn’t be threatening our American companies with taxes in order to get another country to change.”
The easing of economic hostilities has been viewed as a major win for China, especially the relaxing of restrictions on Huawei, which the Commerce Department added to its list of companies that threaten U.S. security in May.
“As China has repeatedly emphasized and as the U.S. knows clearly, a trade war or tariffs can not solve any problem, but will only harm others and oneself,” China’s foreign ministry spokesman reiterated on Monday.
“China is really using this moment to regroup,” Ching Ching Ni, the editor-in-chief of the New York Times’ Chinese website, told Cheddar. They see this as a “time to break the economic and technological dependence on America and American technology and American trade.”
China wants “to build a future where they’re in charge. Nobody tells them what to do, and certainly not the Americans,” Ni added.
In the U.S., Trump’s concessions on Huawei are already facing criticism, notably by hawks in his own party.
“If President Trump has agreed to reverse recent sanctions against Huawei he has made a catastrophic mistake,” Sen. Marco Rubio (R-Fla.) said on Twitter. “It will destroy the credibility of his administrations [sic] warnings about the threat posed by the company, no one will ever again take them seriously.”
Rubio added that he is prepared to reimpose restrictions on Huawei through Congressional legislation if needed.
Trump defended the agreement on Twitter, saying the easing of restrictions on Huawei were at the request of U.S. technology companies and only business that does not threaten national security would be allowed.
The World Trade Organization (WTO) issued a report in June, which found that the use of restrictive tariffs has dramatically spiked to historic levels in recent years.
“This will have consequences in increased uncertainty, lower investment and weaker trade growth,” Roberto Azevêdo, the WTO’s Director-General, said in a statement. “These findings should be of serious concern for the whole international community.”
