Donald Trump’s decision to extend a truce in the trade war with China has triggered a stock market rally across the globe.
On Monday night, the US president signed an executive order extending the deadline for higher tariffs on China until 10 November. Beijing said early on Tuesday it would suspend additional tariffs on US goods for a further 90 days.
In response, markets in Japan and Australia hit record highs on Tuesday, as expectations grow that the US and China could secure a trade agreement before the end of another 90-day pause on additional tariffs.
Tokyo’s Nikkei share index rose by as much as 2.5% to 42,867.69 points on Tuesday, while the Australian ASX 200 index was up by 0.14%, reaching a high of 8,828,67. Its momentum was helped by the Reserve Bank of Australia cutting its main interest rate to a two-year low of 3.6%.
In China, the Shanghai composite index rose by 0.5%. Hong Kong’s Hang Seng index remained broadly flat.
Investors are hoping that negotiators will be able to secure a trade deal during the pause on additional tariffs. Trump has previously threatened tariff rates as high as 245% on Chinese imports, while Beijing has threatened retaliatory tariffs of 125%.
Under current rules, US exports to China are subject to rates of about 30%, with imports from China subject to a baseline tariff of 10%, as well as a 20% extra tariff related to fentanyl smuggling allegations against China. US exports to China are subject to tariffs of about 30%.
Economists have warned that Trump’s trade war regime, especially against China, could seriously damage the global economic outlook, as it could lead to higher costs, disrupt supply chains and reduce international trade.
Oil prices also rose on Tuesday amid hopes the trade war could de-escalate. Brent crude futures rose by 0.4% to $66.90 a barrel, while US West Texas Intermediate crude futures rose by 0.4% to $64.20.
