One day after the US and China inked their phase one trade agreement, Asian equity indices finished on a mixed note, and European equities are also mixed while US equity futures point to a positive open as investors dig into and attempt to digest the eight-part, 96-page agreement. The long and short of it is there are several positives to be had including China committing to $200 billion in additional purchases of U.S. goods, “enhanced” intellectual property protections, and enforcement mechanisms.
However, the agreement has left in place U.S. tariffs on about $370 billion in Chinese goods with possible reductions subject to forthcoming negotiations that will are expected to tackle Chinese subsidies to domestic companies and Beijing’s oversight of Chinese state-owned firms. The next round of trade deal negotiations was expected to begin immediately per comments from President Trump, but China has yet to confirm that timing, which alongside lingering intellectual property concerns, is likely leaving some thinking the agreement is a half-step measure. Over the coming days, we expect more analysis to be had as well as follow up comments, which should offer more clarity to investors on the puts and takes of the agreement.