US-China agreed to work towards a ‘phase one’ deal

As per the speculation floating around, there are high chances of ‘phase one’ deal getting signed between the world’s biggest economies, US and China. The news of a deal coming through has infused confidence in the market, boosting trade, investments and stocks across the world. As a consequence of it many central banks including Federal Reserve of US, the European Central Bank and many across Asia have reduced interest rates to infuse growth. Many nations, such as China and India, have also brought down taxes to stimulate their economies.

Beijing and Washington have been at loggerheads for nearly two years, over tariff issues and intellectual property rights. The trade war between the two created ripples across the world leading to major dip in stock market and manufacturing sector, stalling growth of various economies.

On Wednesday, during a Morgan Stanley Asia Pacific Summit in Singapore, Gokul Laroia, co-chief executive of the group told CNBC, “A deal coupled with policy is much more impactful than just policy. And the effectiveness of whether it’s monetary or fiscal (policy) is a lot lower when you don’t have a trade deal done, and when you have an inherent amount of uncertainty hanging over the corporate world not just in Asia, but globally.”

Laroia added, “We’re optimistic the phase one deal does get done. The most important thing is that the bar for what constitutes a deal has actually come down, so the likelihood of a deal getting done is a lot higher than if we were trying to solve everything.”

According to some political analyst President Trump needs a deal now more than ever for the 2020 re-election. China too wants a deal to put an end to pilling US tariffs, and bring its economy back on track.

Author: Rashmi Sacher