For at least a day, farmers, investors, and others most concerned about the prospect of a trade war between the U.S. and China can breathe a sigh of relief.
In a major speech Monday night at the Boao Forum for Asia, newly minted Chinese president-for-life Xi Jinping vowed to open up China more to foreign companies in the near future. Xi specifically said that China would “significantly lower” tariffs on foreign automobiles this year, which has been a sticking point for President Trump. Xi also said that China was not seeking to run a trade surplus, touching on another Trump obsession.
China currently imposes stiff tariffs on foreign auto manufacturers, and requires them to form joint ventures with Chinese concerns in order to operate in the country. The country’s nationalist approach to foreign investment in general has frustrated outside companies, many of which have struggled for years to negotiate the country’s strict rules for doing business there.
Xi did not mention President Trump or the United States during his speech. But on Monday morning, Trump had labeled the Chinese auto rules “stupid trade” in a tweet, the latest in his salvos against the country that have spooked markets and sparked fears of an all-out trade war. Trump has already imposed steel and aluminum tariffs on China, and threatened $150 billion worth of additional duties. China has retaliated with its own $50 billion tariff package.
Several analysts noted that China has made promises to open up its economy before, as recently as November, and that the proposed changes would take years to implement.
“President Xi’s remarks do not represent a dramatic departure from existing Chinese policy, but rather a reiteration of the same themes Xi has promoted throughout his tenure atop China’s policy making system,” Chaoping Zhu, global market strategist at JP Morgan Asset Management, told CNN Money.
More pressingly, Bloomberg reported that talks between the U.S. and China broke down last week “after the Trump administration demanded that China curtail support for high-technology industries.”
But even if Xi’s promises don’t pan out, his conciliatory tone was enough to soothe the nerves of rattled investors, at least temporarily. Asian markets showed gains on Tuesday, and the the Dow Jones was up sharply as of midday. President Trump, too, took notice:
Trump now has a prime opportunity to declare that his tough negotiating posture got him what he wanted, and move on from the issue without punishing his core voters.
Thankfully, he can always be counted on to take the most reasonable course of action.