Trade war ceasefire good news for SA trade

US president Donald Trump and China’s Xi Jinping have announced a temporary ceasefire on their trade wars.

Global trade has been given a lifeline following an agreement between the United States China to put the brakes on an escalating trade war for a period of 90 days.

President of the United States, Donald Trump, and Chinese president,  Xi Jinping, met on the sidelines of the 2018 G20 Summit in Buenos Aires, Argentina over the weekend and agreed to shelve further tariff increases that were expected to be implemented in January next year.

A statement from the White House pointed out that Trump had agreed to leave the tariffs on US$200 billion worth of products at the 10% rate, and not raise it to 25% at this time.

“China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries. China has agreed to start purchasing agricultural product from our farmers immediately,” said a White House spokesperson, adding that the two countries would aim to reach solutions on the trade stand-off within the 90-day period.

Analysts have repeatedly warned that overall global trade would be negatively affected by these trade wars with Fitch ratings agency warning in its Global Economic Outlook 2018 report that the escalating global trade war is likely to shave 0.1% off South Africa's gross domestic product (GDP) baseline forecast in 2019 and 0.2% in 2020.

Musa Capital economist, Lunkile Mondli, warned that South Africa, like other emerging economies, relied on a strong Chinese economy to stimulate its demand for raw materials exports.

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