The return to the negotiating table ends a six-week stalemate that has unnerved companies and investors, and at least temporarily reduces fears that the world’s two largest economies are headed into a new cold war. Still, it’s unclear whether they can overcome differences that led to the collapse of a previous truce reached at last year’s G-20.
Concern about the standoff has prompted investors to bet on central-bank easing, and pile into havens. Treasury yields have tumbled to their lowest level in years. The Japanese yen, a traditional beneficiary of flight to quality, has gained, while the U.S. dollar has slipped across the board, including against China’s yuan. Stocks have seesawed on each new twist in the trade tug-of-war.
Since the talks collapsed on May 10, Trump has raised tariffs on $200 billion of Chinese goods to 25% from 10%. In recent days, he had indicated that the next step could be a 10% tariff on all remaining imports from China -- some $300 billion-worth, from smartphones to children’s clothes.
Another big hurdle, referenced elliptically by both leaders on Friday, is last month’s U.S. blacklisting of Huawei Technologies Co. on national security grounds, which threatens to cut off the Chinese giant’s access to American technology.