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US, China trade smileys – Equity risk premium now takes a back seat

January 16, 2020 / 06:40 PM IST

Highlights
Phase 1 of trade deal resets many equations
China commits to $200 billion worth of additional imports from the US
But most of the import tariffs remain. To be reviewed after US Presidential poll
Deal improves trade outlook for 2020
India seen as a significant gainer from trade diversion

The announcement of Phase 1 trade agreement between the US and China is a whiff of fresh air that perhaps signals the “beginning of the end” of a bruising trade war that has roiled global markets over the past two years.

It brings in several commitments from China for higher trade and transparent dealings after the US raised concerns about intellectual rights, technology transfer and a host of other issues.

Though doubts still linger about enforceability of the commitments, as of now, it has defused the conflict to a large extent. We also believe that the development improves global trade outlook and reduces equity risk premium, which in general is supportive of global equities.