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China to wait out Trump presidency

China is asking, "how long will you be president?"

Jack Derwin

Digital Journalist, Your Money

While the US president might have signalled success to his political base back home, the trumped-up trade truce struck with his Chinese counterpart may not be what it seems.

The G20 summit in Buenos Aires finished just as many predicted, with the world’s two economic powerhouses leaving the dinner table with a temporary trade war ceasefire.

The essence of the agreement was that no new trade tariffs will be levelled by either side for the next 90 days.

However, while Trump immediately took to Twitter to celebrate the ‘victory’ and boast of the achievement, investors seem less convinced, according to foreign exchange broker Rakuten Securities.

“Looking into the guts of what happened between president Trump and Xi, really the only thing we really got resolved was that we got the 90-day temporary halt on the increase in tariffs,” chief operating officer Nick Twidell told Trading Day.

“Other than that we have agreements to make agreements and we’ve heard a lot of that over the last year especially between China and the US,” he explained.

Given the relative brevity of the 90-day window to resolve wide-ranging and deep divisions over issues of intellectual property and China’s industrial policy among other disputes, a recent market surge may be short-lived.

“I think the market is really across that and until they get certainty across those trade agreements there’s this sell on rally environment, there’s not that optimism to carry these moves through,” Twidell said.

More broadly, there is a belief that China is taking a long-view and waiting for a less combative direction to come out of the White House, according to NAB’s fixed income director.

“Symbolically it looks great but the reality is people don’t think China will adapt in a way that will make America approve,” Mark Todd said.

“I think China doesn’t look for American approval. I think it’s playing a longer game to say, ‘how long will you be the president’?” Todd explained.

Given that thinking, it’s unlikely the fast-growing economy is going to make concessions lightly.

“China is saying, ‘we need to have the liberty that you had as you had as an evolving country’,” Todd said.

“We are not going to stop China, we have to work through that.”

Watch Mark Todd’s full comments below.

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