(Bloomberg) -- U.S. President Donald Trump and Chinese President Xi Jinping agreed to keep their trade war from escalating with a promise to temporarily halt the imposition of new tariffs, Chinese state-run TV reported, as the world’s two largest economies negotiate a lasting agreement.
The truce between the U.S. and China emerged after a highly anticipated dinner Saturday between Trump and Xi on the sidelines of the Group of 20 summit in Argentina. As part of the understanding reached between the two leaders, no additional tariffs will be imposed after Jan. 1, CGTN, a Chinese state-run television network reported.
Investors have been eager for signs of a progress toward keeping an already costly trade dispute from spiraling into a new and broader cold war. White House economic adviser Larry Kudlow said that the meeting went “very well” in a brief comment to reporters as the Trump delegation left Buenos Aires for Washington.
The meeting ran longer than scheduled, ending after more than two hours, the White House said but had no other immediate comment. A person who wasn’t in the room for the dinner but helped with the preparations said afterward that it was encouraging that the meeting went long than scheduled, adding that U.S. signals to reform the World Trade Organization may have stepped up the pressure on China to cooperate.
At the start of the dinner, Trump struck an optimistic note.
“My relationship is very special, the relationship that I have with President Xi,” Trump said as the two men were seated. “This is going to be a very primary reason why we are probably going to be ending up getting something that will be good for China and good for the United States.”
Through a translator, Xi said that “only with cooperation between us can we serve the interest of global peace and prosperity and that is why I look forward to this meeting.”
The meeting was the first face-to-face encounter between the leaders in more than a year, a period that saw Trump impose tariffs on billions of dollars in Chinese imports in a bid to force Beijing to halt trade practices the U.S. considers unfair. Trump has said that while he was eager to strike a deal with Xi, a disappointing outcome could prompt more U.S. tariffs.
Adding to that uncertainty was the roster of senior advisers joining Trump -- including China hawk Peter Navarro, who penned the book “Death By China” and heads a special trade policy office within the White House. The last time Navarro met with Chinese officials, he started a shouting match with Treasury Secretary Steven Mnuchin while still in Beijing, and his presence on Saturday risks sowing friction with China.
Mnuchin, along with Kudlow, have sought to strike a more conciliatory approach toward China. The Treasury chief attended the dinner, too.
Among the key U.S. demands articulated by Kudlow and other officials are a halt in what the administration calls widespread intellectual property theft and forced transfer of technology by China. If the two sides fail to reach a deal, Trump said he will also impose tariffs of either 10 percent or 25 percent on the remaining $267 billion in annual U.S. trade with China.
On Friday, Trump projected optimism that his “big meeting” with Xi would be fruitful, saying that he saw “some good signs” as his staff continued to negotiate with Chinese officials.
Any easing of tensions on trade could ease gains in the U.S. dollar and boost riskier assets including emerging-market currencies and stocks, though investors and analysts agree that the U.S. and China are trying to fix a long-term problem that cannot be solved in one dinner.
U.S. and Chinese officials have been working for weeks on the contours of a possible deal for the two leaders to announce, including an agreement that could set a road map for talks to follow.
Wang Xiaolong, a Chinese Foreign Ministry official, sounded a positive tone before the dinner.
“I hope and believe this meeting, under the current situation, will achieve an important and positive effect on bilateral relations,” Wang, the director general of the department of international economic affairs, told reporters. “As long as everyone can adopt an attitude of mutual respect and equality, constructive dialogue will be able to reduce our differences.”
The dinner was moved up by about an hour after U.S. leader’s schedule opened up on Saturday. He had already canceled a planned meeting with Russian President Vladimir Putin, and then scrapped an afternoon press conference out of respect for the family of former U.S. President George H.W. Bush, who died late Friday night.
Other attendees on the U.S. side included Secretary of State Michael Pompeo, U.S. Trade Representative Robert Lighthizer, National Security Adviser John Bolton and Trump’s son-in-law, Jared Kushner, who’s a senior adviser to the president.
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