By David Lawder and Christian Shepherd
WASHINGTON/BEIJING (Reuters) - China has agreed to "reduce and remove" tariffs below the 40 percent level that Beijing is currently charging on U.S.-made vehicles, U.S. President Donald Trump said, as a trade war truce between the two countries gathers pace, cheering markets.
The two sides also agreed to begin discussions on how to resolve issues of concern, including intellectual property protection, non-tariff trade barriers and cyber theft.
But the White House also said the existing 10 percent tariffs on $200 billion worth of Chinese goods would be lifted to 25 percent if no deal was reached within 90 days, once again setting the clock ticking.
Neither country had mentioned auto tariffs in their official read-outs of the Trump-Xi meeting.
Speaking in Beijing, Chinese Foreign Ministry spokesman Geng Shuang reiterated comments from the government's top diplomat State Councillor Wang Yi who said on Saturday the ultimate goal was the lifting of all tariffs.
"The consensus reached by the leaders of our two countries is to halt the imposition of new tariffs and at the same time the two sides' leaders instructed the economics teams of both sides to intensify talks towards the removal of all tariffs that have been imposed," Geng told a daily news briefing.
Chinese shares, commodities and the yuan currency surged even as uncertainty remained about the deal.
The benchmark Shanghai Composite index closed 2.6 percent higher at 2,654.80 points and the blue-chip CSI300 index jumped 2.8 percent. Both posted their best daily gains since Nov. 2.[.SS]
Still, analysts cautioned the deal may have only bought some time for more wrangling over deeply divisive trade and policy issue, and said China's economy will continue to cool regardless under the weight of weakening domestic demand.
The agreement "is not a ceasefire, it's just a de-escalation. The existing tariffs are still having a negative impact on the Chinese economy, they haven't gone away".
China's factory activity grew slightly in November, a private survey showed on Monday, though new export orders extended their decline in a further blow to the sector already hurt by the Sino-U.S. trade frictions.
"It's 90 days. It's nothing and it doesn't really make any difference. People have already started to reconsider their sourcing arrangements," said Larry Sloven, who has been sourcing and manufacturing in China for three decades.
"Nobody wants to live in a false reality."
Widely read Chinese tabloid the Global Times, published by the ruling Communist Party's official People's Daily, warned people had to have realistic expectations.
"The Chinese public needs to keep in mind that China-U.S. trade negotiations fluctuate. China's reform and opening-up's broad perspective recognises that the rest of the world does things differently," it said in a Monday editorial.
There are also differences in the Chinese and U.S. accounts of what was agreed.
However, Qualcomm said in a statement that it considers the matter closed.
In July, Qualcomm - the world's biggest smartphone-chip maker - walked away from a $44 billion deal to buy NXP after failing to secure Chinese regulatory approval, becoming a high-profile victim of the China-U.S. trade dispute.
There was also caution from the U.S. business community.
William Zarit, chairman of the American Chamber of Commerce in China, said the outcome of the meeting was "as good as we could have expected" considering the complex issues involved.
"But probably the most challenging area to resolve - China's discriminatory economic policies based on state support and domestic market protectionism - needs to be addressed in order to level the playing field and have a sustainable commercial relationship based on fairness and reciprocal treatment."
A senior official at Chinese energy giant CNOOC told Reuters that China was not likely to increase energy and industrial product purchases from the United States by a significant amount in 90 days unless there are mandatory instructions from government forcing companies to buy.
"Trump's policy has been so unpredictable that Chinese companies are being very cautious on buying U.S. commodities with or without tariffs. The risks are simply too big and companies have became more averse to risks now," the official added.
"I am expecting the United States to increase tariffs on China after 90 days despite the efforts and goodwill from China."
(Reporting by David Lawder and Christian Shepherd; Additional reporting by Meng Meng and Stella Qiu in Beijing, Andrew Galbraith and David Stanway in Shanghai, and Noah Sin and Anne Marie Roantree in Hong Kong; Writing by Ben Blanchard; Editing by Sam Holmes, Neil Fullick & Kim Coghill)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)