US-China trade truce may not last with differences unresolved

Bloomberg

The US and China declared a truce in their trade dispute over the weekend, but that will prove temporary if the world’s two largest economies fail to deliver on their vague commitments to re-balance trade.
“We’re putting the trade war on hold,” Treasury Secretary Steven Mnuchin said after the two sides released a joint statement a day earlier. “Right now, we have agreed to put the tariffs on hold while we execute the framework.”
For now, Mnuchin’s cease-fire declaration will soothe the nerves of investors worried that the world’s two biggest economies were on the verge of an all-out trade conflict.
President Donald Trump had threatened to slap tariffs on up to $150 billion in Chinese imports, and Beijing vowed to respond in kind.
But the statement — released on Saturday after two days of talks between Chinese Vice Premier Liu He and senior American officials, including Trump — isn’t seen as a panacea to the months-long conflict.
The truce is “little more than a brief de-escalation of tensions,” said Eswar Prasad, a trade policy professor at Cornell University and former head of the IMF’s China unit. “The fundamental differences on trade and other economic issues remain unresolved.”
Asian stocks gained on Monday and US equity futures jumped on the news that the trade war is on hold for now. Treasury yields nudged higher, taking the dollar with them.
Still, there’s no guarantee that China’s trade frictions with the US won’t re-emerge in the future, a foreign ministry spokesman told reporters on Monday at a regular briefing in Beijing.
During the talks, China and the US agreed to “substantially” reduce the US trade deficit in goods with China. Beijing promised to “significantly” increase purchases of US goods and services, but there was no dollar figure attached, despite White House assurances that China would cave to its demand for a $200 billion annual reduction in the trade gap.
If trade talks with China fizzle, the president may soon feel pressure to clamp down again, with congressional elections looming in November.