Asian bourses rallied on Monday, following a truce in the Sino–US trade war. In return for a three-month delay to a scheduled increase in US tariff rates, China is expected immediately to increase its imports from the US, and to step up negotiations about other concerns such as forced technology transfers and cyber espionage. China’s Shanghai A share index rose 2.5%, while indices in neighbouring economies that are dependent on the Middle Kingdom, including Vietnam and Taiwan, also experienced significant gains. The positive sentiment could be detected stateside. Immediately after opening, the S&P 500 was trading 1.3% higher. The more muted rise in US markets could reflect an asymmetry: the US has less to lose from an escalation in trade tensions than China. Indeed, Beijing appears to have made immediate concessions, with only a temporary reprieve to show for it. Whether this proves durable remains an open question. Both sides appear to be far apart on key issues such as domestic subsidies and the large presence of state-owned enterprises in China’s economy. With that in mind, an escalation of the trade conflict may just have been postponed, rather than avoided.
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