Donald Trump’s decision to extend a truce in the trade war with China for another 90 days triggered a stock market rally across the globe on Tuesday.
The US president signed an executive order on Monday night extending the deadline for higher tariffs on China until 10 November and avoiding a rates cliff edge. Beijing responded the following morning that it would suspend additional tariffs on US goods for a further 90 days.
Trump had previously threatened to put tariff rates as high as 245% on Chinese imports into the US after the deadline passed, while Beijing had threatened retaliatory tariffs of 125%.
In response to the reprieve, markets in Japan and Australia hit record highs on Tuesday, as expectations grew that Washington and Beijing could secure a trade agreement during the fresh hiatus, which extends current baseline rates of 30% on Chinese goods into the US and 10% on American products going the other way.
Tokyo’s Nikkei share index rose 2.5% to 42,867.69 points on Tuesday, while the Australian ASX 200 index closed up 0.41%, to a new high of 8,880. Its momentum was helped by the Reserve Bank of Australia cutting its main interest rate to a two-year low of 3.6%.
In China, the Shanghai composite index rose by 0.5%. Hong Kong’s Hang Seng index remained broadly flat.
Stock markets in Europe also opened higher on Tuesday morning. In the UK, the FTSE 100 index of blue-chip multinationals closed up 0.2% while the French Cac 40 rose 0.5%.
US markets were also up, helped by better-than-expected inflation data. The S&P 500 rose 0.9% in early trading and was on track to top its all-time high set two weeks ago, while the Dow was up 1% and the tech-focused Nasdaq climbed 1.1% and was also heading toward a record.
Economists have warned that Trump’s trade war regime, especially against China, could seriously damage the global economic outlook, as it could lead to higher costs, disrupt supply chains and reduce international trade.
Mark Haefele, of the Swiss bank UBS, said the trade truce repr