What the US-China truce means for business

President Donald Trump with China's President Xi Jinping during their bilateral meeting at the G20 Summit, Saturday, Dec. 1, 2018 in Buenos Aires, Argentina. (AP Photo/Pablo Martinez Monsivais)

The truce between the United States and China means that Corporate America has dodged a massive bullet — for now at least.Executives are breathing a sigh of relief after the trade war between the world’s two largest economies cooled significantly over the weekend. A tariff hike on $200 billion of Chinese goods was supposed to go into effect on January 1 but has been punted for three months.

The US-China ceasefire is not a breakthrough that ends the trade war entirely. The tariffs already imposed remain and new ones could still be imposed. Washington and Beijing have simply agreed to take a timeout to talk.

But for businesses squeezed by the rising costs and deep uncertainty caused by tariffs, it’s a welcomed development nonetheless.”Détente for three months,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, wrote to clients on Monday. “We’ll take it.”
The trade war between the United States and China has been a major concern for executives and investors alike. Both countries’ stock markets have tumbled. Companies have faced higher costs. Americans farmers are hurting badly from China’s retaliatory tariffs on US soybeans.
The pain was set to get much worse. Prior to the truce, the Trump administration was scheduled to raise tariffs on $200 billion worth of Chinese imports from 10% to 25%. And President Donald Trump had threatened to impose tariffs on additional $267 billion of Chinese goods. The next tranche of tariffs would have directly raised costs on consumer goods, including potentially Apple’s (AAPL) iPhones.