Since Beijing announced recently that both the U.S. and China would eventually roll back tariffs and "phase them out," as part of a mutually agreed upon neutralization plan, financial markets have remained elevated. However, it is still nebulous when and how this plan will actually be implemented, and whether there will be roadblocks on the way.
"If the phase-one deal is signed, China and the U.S. should remove the same proportion of tariffs simultaneously based on the content of the deal," Chinese Commerce Ministry spokesman Gao Feng said at a press briefing. "This is what [the two sides] agreed on following careful and constructive negotiations over the past two weeks," he said.
That said, there were conflicting statements from the U.S. side of the issue about what the phasing out actually entails. Some claimed it was more of a neutralization move while other officials denied the existence of a formal rollback.
Michael Pillsbury, a Hudson Institute expert who acts as an advisor to the Trump administration, said he believed the statement from China's Commerce Ministry "may represent wishful thinking on the Chinese side more than a specific agreement."
Trump may have been bluffing also for political reasons, to make it seem as though he is taking action with respect to the trade war. However, it is in his interest to keep the anti-China sentiment alive, as the Republican voter base seems to respond well to this rhetoric.
Now it seems as though the markets were overreacting, as Trump has made it clear he has no intention of easing tensions with China: "Since China's entrance into the World Trade Organization in 2001, no one has manipulated better or taken advantage of the United States more," Trump said. "I will not say the word 'cheated,' but nobody's cheated better than China, I will say that."
"I said, 'This is not going over well.' It was in Beijing, this massive hall," Trump continued. "But I said I don't blame China, I blame China. Then I realized it's true."
That said, on Friday, Larry Kudlow, director of the U.S. National Economic Council, said that a partial trade agreement between the United States and China could be signed at the ministerial level. That is, neither Trump nor Xi would actually be involved in any of the agreements, or sign off on anything on the federal level. Kudlow has consistently been feeding the market small pieces of speculative news to bolster investor confidence. On Thursday, he said the two countries were "getting close" to reaching a trade deal, even though he did not specify how.