Why the US-China trade ceasefire won’t save Christmas

The White House announced on Monday that the United States and China will temporarily suspend or lift the import tariffs they imposed on each other in April, pending further negotiations on a trade agreement. But while the announcement offers long-awaited relief to businesses and has boosted market confidence, investors would be wise to curb their enthusiasm.

This is particularly true when the US is negotiating with China, which has both a huge economy (and thus substantial leverage) and a strong interest in withholding concessions, because yielding to Trump’s demands could undermine national pride and trigger a domestic backlash. And while Trump has a record of declaring dubious victories, it would be difficult for him to claim success in his trade war with China if he simply backed down. As a Chinese saying goes, once you are riding a tiger, it is difficult to get off.