There were enormous sighs of relief in global financial markets when the US and China announced far bigger than expected cuts to their tariffs on Monday. However, the deal cut in Geneva is a reprieve within the trade war, not a resolution.

While the reductions in tariffs – the US dropped its rate from 145 per cent to 30 per cent and China slashed its retaliatory tariffs from 125 per cent to 10 per cent – were greater than anyone (including Donald Trump) may have anticipated, the cuts last only 90 days.

The big rebound in sharemarkets and a bounce in the US dollar seemed to price in an end to the worst of Trump’s trade wars. Yet given how fixated he is with tariffs, and his proclivity for announcing lurching policy shifts via social media posts – seemingly on the spur of the moment – the markets’ reaction might be premature.

President Donald Trump has blinked in the stand-off with China.Credit: Bloomberg

In effect, the Geneva meeting has bought time for the US and China to negotiate, with no certainty that, come mid-August, the trade war might not escalate again. One could say something similar about the 90-day pause in Trump’s reciprocal tariffs on another 90-odd countries that ends in July.

No one knows what the world’s trade regime will look like at the end of these pauses. Uncertainty and the 10 per cent universal baseline tariffs that remain in place continue to affect supply chains, businesses, investment and employment around the world until the outcome is known. Even with the pauses, real and material economic damage is already being done.

Despite the weekend agreement between the US and China, that’s particularly true of the damage the trade war is causing to their economies.

The Geneva meeting has bought time for the US........

© Brisbane Times