Financial Markets Wall Street

Trader Gordon Charlop works on the floor of the New York Stock Exchange at the close of trading, Monday, Dec. 3, 2018.  (AP Photo/Richard Drew)

The G-20 summit produced modest but welcome progress on trade reform between China and the United States and in the G-20 commitment to much-needed changes to the World Trade Organization. Given the expectation that President Donald Trump would escalate his tariff war against China, casting a pall over the global economy and taking the focus away from improving international trade rules, the outcome was encouraging.

But hazards remain along the road to a lasting U.S.-China trade deal. Investors who initially applauded the outcome were confused Tuesday after scrutinizing it further and hearing conflicting messages, leading to sharp declines in the market.

Before leaving for the meetings in Buenos Aires, Mr. Trump said he planned to raise tariffs on $200 billion of Chinese imports from 10 percent to 25 percent and was prepared to introduce tariffs on the remainder of Chinese imports unless he got a deal. But he changed his mind after a dinner Saturday with China’s President Xi Jinping in which the two leaders discussed China’s plans to introduce reforms sought by the Trump administration and the problem of North Korea’s nuclear weapons.

Mr. Trump postponed a decision on higher tariffs for three months, during which time China is expected to buy more U.S. agricultural products, crack down on the manufacture and export of the powerful opioid fentanyl, put pressure on North Korea to denuclearize and give U.S. firms greater access to Chinese markets. The United States also is expected to expand China’s access to the U.S. market.

Negotiations will continue during the 90-day pause on ending China’s practice of forcing American firms in China to share their technology, improving Chinese protection of intellectual property, cyber-espionage and Chinese nontariff barriers to American goods. There is little chance that the two countries can come to an agreement that will satisfy both sides during that short time span, but there must be more clarity and less confusion going forward.

Mr. Trump tweeted that China has also promised to reduce and remove tariffs on cars coming into China from the United States. This “promise” — so far unacknowledged on the Chinese side, leading to some of the investor confusion — would be a major benefit for auto manufacturers in South Carolina such as Volvo and BMW and their suppliers, who currently face a 40 percent tariff.

For the longer run, we applaud the decision of the G-20 leaders to drop from their joint communique any expression of concern about the U.S.-China confrontation on trade and instead endorse reform of the World Trade Organization. In their words, the world’s trade rule-setting system is “falling short of its objectives and there is room for improvement.”

Mr. Trump has demanded WTO reforms to limit the unfair advantages China still claims as a so-called “underdeveloped” nation, a description that hardly fits the world’s second-largest economy. A number of G-20 nations led by Canada have started the process of drafting reforms, but getting the necessary agreement from all WTO members is likely to be a long process with lots of haggling. While the results probably will not become obvious any time soon, the seeds of long-overdue changes may have been planted in Buenos Aires.