BEIJING — Chinese stock markets surged to their highest level in almost four years, and the state media reacted with similar glee, after President Trump declared he would delay his plans to increase tariffs on China.
The announcement reinforced the growing optimism that an end may be in sight to the protracted trade war between the world’s two largest economies.
“The nearer we are to the finish line, the more we have to rely on the decisive factors of rationality and calmness,” the Chinese language edition of the Global Times, a nationalist tabloid, wrote in an editorial Monday, after Trump announced his decision in a tweet. “In order to prevent further uncertainties, neither side should chase after petty gains when the bigger picture is coming into shape.”
The tariffs on $200 billion in Chinese imports were due to rise from 10 percent to a whopping 25 percent this Saturday if negotiators were not able to reach an agreement by the March 1 deadline that Trump had set.
But Trump tweeted Sunday that the United States has “made substantial progress” in trade talks and that he planned to host Chinese President Xi Jinping at Mar-a-Lago, his Florida estate, to finalize the deal. China’s state-run Xinhua news agency also reported “substantial progress,” without going into detail.
Chinese stocks rose sharply on the news. The benchmark Shanghai and Shenzhen composite indexes both rose 5.6 percent during trading on Monday. Overall, Chinese stocks have risen more than 25 percent since the beginning of the year, and February is shaping up as the best month since April 2015.
Trump specifically said that there had been progress on the structural issues he is most concerned about, naming intellectual property protection, technology transfer, agriculture, services and currencies.
While he was campaigning for president, Trump repeatedly lambasted China for what he said were its unfair trading practices, from industrial espionage and currency manipulation to subsidies to give Chinese companies an advantage in the global market.
Beijing was taken aback to discover that this was not just campaign rhetoric or an area where Trump was looking for a quick victory he could crow about on Twitter, but a harbinger of his intent to embark on a long battle to redress some of the imbalances in the two countries’ trading relationship.
The U.S. trade deficit with China is expected to have grown to more than $400 billion in 2018, a record.
The question now is whether the trade deal between the two countries will amount to pledges from China to buy more American products, such as soybeans and liquefied natural gas, to narrow that gap, or whether the Trump administration can persuade Beijing to embark on painful structural reforms.
The two sides met for a seventh round of talks last week, the third talks in a month, to try to make headway on these issues.
Chinese state media said the two sides were inching “closer to reaching a mutually beneficial and win-win agreement.”
“The extension of the latest round of negotiations and the delaying tariff increase on Chinese imports testify to the sincerity, high attention and sense of urgency of both the Chinese and U.S. sides,” Xinhua reported. “Yet they also indicate that there are still some differences that need more time to be ironed out.”
Wang Yong, a professor at Peking University’s School of International Studies, said China has made many concessions, mainly about increasing access to the Chinese market.
“On the whole, the agreement has stabilized the expectations of the global economy,” he said.
John Gong, a professor at the University of International Business and Economics in Beijing, said there is still more work to be done.
“The whole purpose of these negotiations is not just to prevent the tariffs from rising,” he said. “We want to get back to before July 6, when the first wave of tariffs was imposed.”
In July last year, Trump slapped tariffs of 25 percent on $34 billion worth of Chinese imports, then on another $16 billion worth of goods in August. He followed that in September with tariffs on a further $200 billion of Chinese imports — and threatened to impose duties on the remainder, which total $267 billion, if Beijing retaliated.
Trump’s Sunday night tweet showed how far apart the two remained, said James Zimmerman, an American lawyer in Beijing and former head of the American Chamber of Commerce in China.
“The tariff postponement simply means that both sides realize that they are nowhere near a viable deal, and to avoid a showdown later this week, they need some breathing room,” he said.
Earlier in the week, the president suggested that the dispute over Huawei Technologies, the world’s largest communications equipment manufacturer, was also part of the discussion. Asked if he would consider dropping criminal charges against Huawei as part of a deal, Trump said Friday that he would be discussing the issue with the attorney general and U.S. attorneys.
The Justice Department last month announced criminal charges against Huawei and its chief financial officer, Meng Wanzhou, alleging bank and wire fraud, violating U.S. sanctions on Iran and conspiring to obstruct justice related to the investigation.
Meng, the daughter of the well-connected founder of Huawei, was arrested in Canada and is now fighting extradition to the United States, where she could face up to 30 years in prison if found guilty on all counts.
China has since arrested two Canadian citizens on charges of endangering national security, and authorities in Beijing continue to push aggressively for Meng’s release.
Zimmerman decried Trump’s attempt to take advantage of China’s anger over the arrest of Meng.
“Tying a criminal investigation to trade negotiations is unwise horse trading and a further erosion of the rule of law,” he said. “It creates a bad precedent where we now live in an era of ‘take hostages, then talk.’”
Chinese experts, however, continued to hope that the charges against Meng would be dropped and she would be allowed to return to China.
“The China-U.S. agreement will play a positive role in maintaining China-U.S. trade in technological products,” said Wang of Peking University. “It’s hoped that the Huawei and Meng Wanzhou issues will be alleviated or even solved, but there are still uncertainties.”
Liu Yang and Lyric Li contributed to this report.
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