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The Chinese and US national flags.

The Chinese and US national flags. Photograph: Jewel Samad/AFP via Getty Images

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The US and China will finally sign their Phase One trade deal today, but there’s no much celebration in the markets.

President Donald Trump and vice-premier Liu He will both put their signatures to the agreement, at a ceremony in Washington later today. The deal should calm the turbulent trade conflict between the two nations which blew up in 2018, slowing global trade and hurting the world economy.

We can expect Trump to talk up the deal as a major breakthrough, with Beijing agreeing to buy up to $50bn of US agricultural products per year.

But the fizz is going flat, even before the corks fly out of the bottles.

That’s because the White House has already declared that the existing tariffs imposed over the last 18 months or so will remain in place until a full trade deal deal is agreed.

That means tariffs on $360bn of Chinese imports will remain in place, probably until after November’s presidential election.

Treasury secretary Stephen Mnuchin broke the news to reporters overnight, saying:

“These tariffs will stay in place until there is a Phase 2. If the president gets a Phase 2 in place quickly, he’ll consider releasing tariffs as part of Phase 2.”

Stuart Wallace

Existing tariffs on billions of dollars of Chinese goods coming into the U.S. are likely to stay in place until after the November election

January 15, 2020

We don’t know exactly what’s in the 80-page Phase One deal, but it appears to duck some of the really serious sticking points, such as intellectual property protections and China’s subsidies of its companies.

Investors fear that a comprehensive trade deal could take a long time to agree, given the long grind just to agree Phase One.

There’s also concern that China might not stick to the deal, meaning it could swiftly unravel:

As Ipek Ozkardeskaya, senior analyst at Swissquote Bank, puts it:

The US – China trade deal is like watching a live show in the theatre of the absurd. The Trump administration revealed a detail that nobody expected just before the signature of the phase-one trade deal today: the tariff cuts will not take effect before the US election in November.

This means that the US tariffs will continue weighing on Chinese exports for almost an additional year, while the emerging market giant will certainly be asked to deliver on its promise to buy massive amounts of US farm goods and manufactured products immediately. The risk here is that the double-standard agreement could provide a weak basis for the future negotiations, impair the benefits, or even spoil the deal.

So don’t bank on major action in the markets today, although the Dow Jones industrial average did briefly jump over 29,000 points yesterday, before tariff fears struck….

The floor of the New York Stock Exchange yesterday

The floor of the New York Stock Exchange yesterday Photograph: Brendan McDermid/Reuters

Also coming up today

The World Economic Forum are releasing their annual Global Risks report, identifying the key threats to the global economy ahead of next week’s gathering in Davos. Trade wars, the climate emergency and geopolitical tensions will probably feature highly.

We also get the latest UK inflation data – a weak reading could give the Bank of England more leeway to consider an interest rate cut.

The agenda

  • 9am GMT: World Economic Forum publishes its Global Risks report
  • 9.30am GMT: UK inflation data for December. Expected to remain at 1.5%, a three-year low
  • 4.30pm GMT: US and China sign their Phase One trade deal

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