The US and China have outlined a cooling in their 17-month long trade war, helping push US stock markets to record highs.
Hours after reports of a so-called phase one agreement being signed off by President Donald Trump, trade officials in Beijing confirmed significant progress had been made following months of tough talks.
Mr Trump later said a “very large” deal had been done.
…..The Penalty Tariffs set for December 15th will not be charged because of the fact that we made the deal. We will begin negotiations on the Phase Two Deal immediately, rather than waiting until after the 2020 Election. This is an amazing deal for all. Thank you!
— Donald J. Trump (@realDonaldTrump) December 13, 2019
At a late night news conference, reporters in the Chinese capital were told arrangements were being made for both sides to meet and sign the deal.
It averts the prospect of an escalation in the trade war, that was due to take effect this Sunday.
The Chinese said the US had agreed to withdraw threatened tariffs on $ 160bn of Chinese consumer goods, including toys and video games consoles.
As such, the officials added, China’s threatened retaliation had been lifted.
The terms essentially commit China to buying more US goods and services in return for a reduction in some of the tariffs covering the country’s exports to the US.
Officials in Washington said the US will maintain 25% tariffs on $ 250bn of Chinese imports, with the penalty being reduced to 7.5% on the $ 120bn of goods remaining.
The trade war has been blamed for a slowdown in the global economy – particularly in export-dominant countries.
The news helped the Dow Jones Industrial Average, S&P 500 and the tech-focused Nasdaq to build on gains of the previous day to trade at record levels as investors placed bets on an improved outlook.
The dollar also surged – taking some of the gloss off the pound’s post UK election recovery.
Oil stocks saw some of the biggest gains as prices climbed on hopes the promised trade deal would eventually lead to the total withdrawal of tariffs imposed by both sides.
However, the stocks later fell back with traders citing a lack of clarity on exactly how much the Chinese were willing to buy – and from when.
European markets had also initially risen sharply only to pare their gains.
Mr Trump reacted to confirmation of the agreement via Twitter on Friday.
The president wrote: “We have agreed to a very large Phase One Deal with China.
“They have agreed to many structural changes and massive purchases of Agricultural Product, Energy, and Manufactured Goods, plus much more.
“The 25% Tariffs will remain as is, with 7 1/2% put on much of the remainder.
“The Penalty Tariffs set for December 15th will not be charged because of the fact that we made the deal.
“We will begin negotiations on the Phase Two Deal immediately, rather than waiting until after the 2020 Election. This is an amazing deal for all. Thank you!”