Trucks stand prepared to haul shipping containers at the Port of Los Angeles, the busiest container port in the US, on September 18, 2018 in San Pedro, California. (MARIO TAMA / GETTY IMAGES / BLOOMBERG)

President Donald Trump said he was postponing the imposition of 5 percent extra tariffs on Chinese goods by two weeks, a move that delays the next escalation of the trade war and brightens the backdrop for upcoming negotiations.

Trump wrote Wednesday on Twitter that the US has agreed to postpone the tariff increase at the request of Chinese Vice Premier Liu He and as a goodwill gesture.

S&P 500 futures climbed 0.5 percent and the offshore yuan strengthened 0.3 percent against the dollar. The yen fell.

Negotiators are due to meet in Washington in coming weeks to push forward talks to end the trade war, which is causing increasing economic damage as it stretches into its second year. There's little sign that substantive progress is being made on the two countries' differences, while Trump still has further tariff increases lined up.

"The negotiators have had a year to come to an agreement, and they remain structurally at odds on key issues," said Andrew Polk, co-founder of research firm Trivium China in Beijing. "Another two-week reprieve doesn't change those fundamentals."

On Wednesday, China announced a range of US goods to be exempted from 25 percent extra tariffs enacted last year. While that may create some goodwill in Washington, China is keeping the pressure on US agricultural exports like soybeans produced in key Trump-supporting states.

Chinese Vice Premier Liu He wavs as he departs following trade negotiations at the U.S. Trade Representative offices in Washington, D.C. on Friday May 10, 2019. (ALEX EDELMAN / BLOOMBERG)

An editorial Wednesday in Beijing-based Global Times newspaper said the exemptions were a goodwill gesture that would benefit some Chinese and US companies. The paper's editor tweeted that he saw Trump's decision to postpone extra tariffs as creating "good vibes" for the early-October talks.

"Trump's goodwill gesture suggests that the trade war is starting to bite and the US may be more eager to close a deal," said Chua Hak Bin, an economist at Maybank Kim Eng Research Pte in Singapore. "The clock is ticking and Trump's approval ratings are sliding, with manufacturing now in recession."

Trump escalated the US-China trade war in August when he announced an increase in the levy on $250 billion of Chinese goods to 30 percent, from 25 percent, starting October 1. Further increases are planned for December.

The delay "shows Trump doesn't want to increase tariffs before the trade talks in early October, and it creates good conditions," said Tommy Xie, an economist at Oversea-Chinese Banking Corp in Singapore. "It adds to the hope that there'll be good news from the October meeting, and markets will wait and see."

Continue Reading

on chinadailyhk