Thursday was an exciting day for the global markets following US President Donald Trump’s tweet saying China and the US had reached a trade deal. But just hours later, when the agreement was finally made public, the excitement started dying down due to the modesty of the deal.
Gold, which had a day earlier shed a few coins following confirmation of the much-awaited trade deal on Friday made a stronger comeback as risk aversion returned to markets.
Both the trade deal reports of the US and China have not indicated any significant milestones towards the deceleration of the trade war.
In a statement published on the US Trade Representatives website, the Phase One agreement touches on seven main issues of concern: Intellectual Property, Technology Transfer, Agriculture, Financial Services, Currency, Trade Expansion, and Dispute Resolution.
The US Treasury Secretary Steven Mnuchin said the agreement “marks critical progress toward a more balanced trade relationship and a more level playing field for American workers and companies.”
“President Trump has focused on concluding a Phase One agreement that achieves meaningful, fully-enforceable structural changes and begins rebalancing the U.S.-China trade relationship. This unprecedented agreement accomplishes those very significant goals and would not have been possible without the President’s strong leadership,” United States Trade Representative Robert Lighthizer added.
While the deal was meant to ease the ongoing economic turmoil, it only appears to have limited provisions to reduce existing tariffs. The agreement states that the US will retain 25% tariffs on about $250 billion worth of Chinese imports each year, in addition to 7.5% tariffs on another $120 billion in imports.
But both Beijing and Washington remained mum on what China would offer in return.
Mr Trump talked of “massive” exportation of U.S. goods to China soon, something that Mnuchin said would be “enforceable”. Beijing, however, said that it would later communicate the timing, variety, and quantities of the consignments it would be getting from the US.
By 11:55 AM ET (1655 GMT) yesterday, stocks were on a downward curve as safe-haven assets such as gold started rising due to the underwhelming reality of the trade deal.
Gold jumped but was still not able to set a new record high, settling at $1,480.55 an ounce.
Spot gold also gained 0.4% to $1,476.39 while Silver futures increased 0.4% to $17.02 an ounce. Platinum futures dropped 1.6% to $929.40.