US-China trade relations take centre stage at World Economic Forum

The second day of the annual World Economic Forum gets underway in Davos, Switzerland today. Some of the world’s top

davos 2020

Photo: AP

The second day of the annual World Economic Forum gets underway in Davos, Switzerland today.

Some of the world’s top business and political leaders will attend the conference, including US President Donald Trump, German Chancellor Angela Merkel and Goldman Sachs boss David Solomon.

Discussions are likely to devote considerable attention to the phase one trade deal signed by the US and China a week ago. In panels on long-term investing and the future of financial markets, business executives and government officials will offer their views on whether the signed phase one deal and a potential second phase deal will lift enough worldwide uncertainty to justify growing investor confidence and increased government spending.

While the phase one deal has indeed lifted some uncertainty and spurred gains in stock markets worldwide—in the US for example, all three benchmark indexes reached record highs in the days following the announcement of the deal—whether this restoration in confidence extends to the long term will depend on if the agreement survives and advances to a second phase.

Economists remain wary. An ambitious clause calling on China to increase its purchases of at least $200 billion in US products and services over the next two years, along with a loose exit clause allowing either country’s top trade representative to take “remedial” action against an unresolved allegation of a breach, leaves the agreement on tenuous grounds. Indeed, of the 750 business leaders surveyed in the Forum’s annual Global Risk Report, 78% said they expect “economic confrontations” to rise in 2020.

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