- On 1 December, at the G20 in Buenos Aires, Trump and Xi Jinping agreed a 90-day truce in the trade war.
- Tariffs already applied did not disappear, but the threat of raising them was suspended for that period.
- A truce is not an agreement: it is worth reviewing exposure to the conflict and preparing alternatives calmly.
On 1 December 2018, at the G20 summit in Buenos Aires, Donald Trump and Xi Jinping agreed a 90-day truce in the trade war between the United States and China. It was the first clear sign of easing after months of escalation, and markets welcomed it with relief, though without forgetting that the underlying conflict remained open. The ninety days offered time to negotiate, not a guarantee that the differences would be resolved.
For companies, the news offered a window of time. For ninety days no new tariff tensions would be added, and the two sides undertook to negotiate. But a pause is not a solution, so it is better seen as an opportunity to prepare than as a guarantee of calm. What is done with that margin can make the difference if the negotiations fail. The better one’s own exposure is known, the easier it will be to act quickly and without drama.
A pause with a date
The 90-day truce suspended the escalation and opened a period for negotiation. Tariffs already applied did not disappear, but the threat of raising the rates was suspended for that period, which offered some relief to companies. For short-term planning, that breathing space has real value.
That relief is partial but real. Those buying products affected by the threat of raising tariffs to the highest level knew, at least, that they would not have to pay that extra cost immediately. They could take decisions on orders, prices and contracts with somewhat more visibility. And those planning investments in exposed chains gained some time to assess them under less pressure. But that visibility lasts only as long as the truce, so it should not be turned into a permanent basis for planning.
Why it is not a solution
A truce is not an agreement: if no understanding is reached within the period, the conflict may worsen again. That risk should be present in any decision that depends on conditions staying stable. Companies therefore still lacked the certainty to take investment or sourcing decisions for the long term.
Deciding on a major investment, opening a new production line or signing a multi-year supply contract requires confidence that conditions will remain reasonably stable. With an expiry date in view, that confidence is limited. That is why many companies chose to postpone irreversible decisions and keep flexibility, a prudent attitude while the picture remains unclear. Flexibility has a cost, such as postponing projects, but it is usually lower than that of committing to a decision that later proves unsuitable.
How to use the margin
The ninety days are a window to review exposure to the conflict: which products are affected, which suppliers or customers depend on the markets involved and what alternatives exist. Doing it now, calmly, makes it possible to decide without the pressure of a new escalation.
A useful exercise is to prepare two or three scenarios for when the truce ends: an agreement, an extension or a return to escalation. For each, the effect on costs, sales and financing is estimated, and the decisions to be taken are defined. Those who have it ready act in an orderly way when the date arrives, while those who have not are forced to improvise under the pressure of events. And sharing the scenarios with the financial adviser and the bank makes it easier to have the right financing in each case.
A truce is a good time to prepare, not to relax.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
