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The widely-anticipated trade truce reached by the US and China in the wake of the G20 summit may look like good news, but onlookers may want to refrain from popping any champagne corks just yet, according to research firm Oxford Economics.

“While renewed communication between the two trading partners is encouraging, opposing strategic ambitions and distinct ideological beliefs remain significant barriers to a long-term trade agreement,” says Gregory Daco, the firm’s chief US economist, adding: “We maintain our long-standing assumption that existing tariffs between the two nations will remain in place for the foreseeable future. Indeed, the contrast between official communiqués shows that beyond the posturing and promises, much progress remains to be done to reach even a ‘deal’.”

For President Trump, a long-term deal could only come about if his negotiators are able to extract commitments from China to stop forced intellectual property transfer, and to import more American goods. Meanwhile, President Xi is more focussed on removing or at least reducing the raft of tariffs slapped on his country’s exports by an increasingly pugilistic US administration.

Speaking to GTR earlier this year, Welles Orr, international trade advisor with law firm Miller & Chevalier, who served as assistant US trade representative for congressional affairs in the George H W Bush administration, pointed out the need to be mindful of the psychology of the Trump administration when assessing progress between the US and China. “You have to keep in mind that this calculation for this administration is all about delivering on commitments and winning. That’s who the president is. That’s how he operates, that’s how he thinks, and that’s how he’s got his team in the administration to think.”

Thus far, there’s little in the way of a concrete ‘win’ to point to. The so-called truce saw the two leaders agree on three principles: relaunching trade talks while suspending the threat of new tariffs, working toward addressing trade imbalances and finding a solution to the issue of Huawei. But beyond this political posturing, much remains to be done to normalise trade relations between the two sides, says Daco. “As an illustration, the tariffs threat suspension is viewed as temporary by the US and indefinite by China. Similarly, the US believes China will import a ‘tremendous’ amount of agricultural products while China has on numerous occasions mentioned its imports would reflect final demand. Finally, while the partial relaxation of the ban on selling to Huawei is intended to serve some US interests, a comprehensive solution won’t be found until the ‘very end’ of trade talks.”

“The downside risks have not increased for now,” says Tommy Wu, Oxford Economics’ senior economist in Hong Kong, which is probably about as optimistic an assessment of the current situation as one is likely to come by. While he sees the truce likely helping to contain downside risks to China and the rest of Asia’s growth outlook for the time being, he sees Chinese exports continuing to come under pressure in the near term – proof, if any were needed, that the damage to trade flows and global activity is ongoing.

“Tariffs are unlikely to dissipate any time soon,” cautions Daco.