Hopes were raised on Wednesday of a possible solution to the trade war between the US and China amid reports that the Chinese were dropping the 40 per cent import charge they had imposed earlier this year on American cars.Reducing the charge to the former, 15 per cent rate would represent a significant reversal to tariffs Peking imposed in response to President Donald Trump's decision to impose punitive charges on Chinese imports - measures that were due to stiffen considerably in the New Year.

Presidents Trump and Xi Jinping make concessions after G20 meeting

Late last month, however, after Mr Trump and President Xi Jinping dined together at the G20 summit in Buenos Aires, the US announced a 90-day delay in plans to impose 25 per cent tariffs on most Chinese imports to allow time for negotiations on the long-standing trade dispute.Mr Trump described the dinner with Mr Xi as "an amazing and productive meeting with unlimited possibilities for both the United States and China”.However, optimism of an imminent deal appeared to have been dashed earlier this month when Meng Wanzhou, the chief financial officer of the Chinese telecoms giant Huawei, was arrested in Canada on a US warrant alleging fraud in connection with the violation of sanctions against Iran.

Arrest of Huawei CFO Meng Wanzhou gives Trump and US leverage

Ms Meng, 46, who denies any wrongdoing, is the daughter of Huawei's founder and her detention deeply angered Beijing.Now, however, she has been released on bail and Mr Trump has hinted he could intervene to have the charges dropped.The president said in an interview with the Reuters news agency, "If I think it’s good for the country, if I think it’s good for what will be certainly the largest trade deal ever made – which is a very important thing – what’s good for national security – I would certainly intervene if I thought it was necessary.”Now, senior Chinese economic officials have reportedly told US Treasury Secretary Steven Mnuchin and US trade representative Robert Lighthizer that the plan for 40 per cent tariffs on American car imports would be dropped.

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Markets encourged by reduction in tariffs

The Financial Times described the move as the first concrete sign of a cooling in the trade war that threatened to disrupt economies across the globe. The news led to a rally in stock markets in Australia and across Asia, and boosted European carmakers' shares.Craig Erlam, an economist at trading firm Oanda, said Peking's decision was "a gesture aimed at de-escalating the trade war between the world’s two largest economies".He added, "While the details of the cut are not yet known, the move reverses the tariff hike in July in response to those imposed by the US, which is hopefully a sign of more unwinding to come."It’s too early to be optimistic, though, as tensions remain high, with the arrest of Huawei CFO Meng Wanzhou further complicating the relationship, although Trump has suggested he could intervene, which makes the timing of the arrest all the more suspicious."Neil MacKinnon, global macro strategist at VTB Capital, added, “The equity markets are taking encouragement from recent reports of a potential truce in the US-China trade dispute. China is said to be considering the removal of the increased tariff on US auto imports, with President Donald Trump saying he would intervene in the case of the arrested Huawei CFO if it would help secure a trade deal with China. Asian equity markets are all positive this morning as a result."Of course, the newsflow regarding developments in the US-China trade dispute has been notoriously erratic and positive news can quickly give way to negative news.”

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