The announcement of a one-year trade truce between the United States and China has eased months of tension that had unsettled businesses and investors worldwide.
Presidents Donald Trump and Xi Jinping agreed to pause further tariff increases and suspend new export restrictions in their meeting at the APEC summit in South Korea on 30 October.
Is the China-US deal a resolution?
Under the terms of the new agreement, China will defer its planned export controls on rare earth minerals, while the United States will withdraw a threatened 100 per cent tariff on Chinese goods.
The two countries also pledged to review the arrangement annually and to resume talks on longer-term trade cooperation, which is promising news.
The deal lowers tensions for now, but it does not dismantle the web of tariffs, blacklists and restrictions that have built up since 2018.
How does it affect the global economy?
The deal’s implications stretch beyond the two countries directly involved in discussions.
The United States and China account for more than two-fifths of global GDP and almost half of manufacturing output.
Rare earths are required for everything from smartphones to wind turbines and any disruption in their supply could have damaging consequences.
The economic relationship between these two countries shapes trade flows, investment patterns and commodity prices worldwide.
A sustained truce will hopefully help stabilise global growth and give smaller economies that trade heavily with both sides some breathing room to recover.
However, a lot of this will depend on how the agreement is enforced. High tariffs remain in place, and key disputes over technology, data access and intellectual property remain unresolved for now.
Both nations will likely continue to use trade policy as leverage, which means the risk of renewed tension has not disappeared entirely.
What are the implications for UK businesses?
UK businesses importing materials affected by US-China tariffs will hopefully see costs stabilise, while exporters may find improved sentiment among trading partners in Asia and North America.
Supply chains are still vulnerable to political risk, so we believe diversification should stay high on the agenda where possible.
Companies with complex sourcing structures would be wise to map alternative suppliers and review contingency plans.
Those with operations in China or the US should stay alert to further policy changes as both sides revisit the deal next year.
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