US-China trade truce doesn’t change outlook for global economy: Moody’s

Mumbai, July 1 (IANS) Moody's on Monday said that the agreement reached between the US and China at the G20 Summit to restart trade talks will be a partial relief for the stock market but doesn't fundamentally change its outlook for the global economy.

Moody's said it maintains its baseline view that the tariffs implemented to date will shave 0.1 percentage point off US growth and about 0.2 percentage points off China's growth this year through direct trade channels.

"Although the agreement will likely partially relieve recent negative sentiment in the financial markets and support near-term growth, it stops short of removing existing tariffs," Michael Taylor, Managing Director, Moody's Investors Service, said.

"However, we expect China will continue to ease policy in an effort to offset the impact of the existing tariffs and that major central banks will maintain their bias towards more accommodative policy," he added.

Moody's said that few details of the agreement have been disclosed so far, the truce on further tariff escalation appears to indicate that both sides have a desire to make progress in resolving their current disputes, underpinned by the US' relaxation of the restrictions it had placed on Huawei (unrated).

"However, significant obstacles remain to obtaining a long-term agreement, due to the lack of an agreed mechanism for dispute settlement, and the considerable differences that exist between the two sides on core issues such as technology, intellectual property, industrial policies, and the creation of a level playing field for foreign firms operating in China," it added.