China agreed with the US to cancel existing trade tariffs in phases

China’s Commerce Ministry said Thursday that Beijing had agreed with Washington to lift existing trade tariffs between the two nations in phases.

Gao Feng, a spokesperson for China’s Commerce Ministry, said that both sides had agreed to simultaneously cancel some existing tariffs on one another’s goods, according to the country’s state broadcaster.

The ministry spokesperson said that both sides were closer to a so-called phase one trade agreement after constructive negotiations over the past two weeks.

One important condition for a limited trade agreement, Feng insisted, was that the U.S. and China must remove the same amount of charges at the same time.

Fresh hopes for a phase one trade accord prompted U.S. stock index futures to rally Thursday morning, with Dow futures poised to open up more than 120 points.

Market participants had expected the two economic giants to sign a deal later this month, after both Washington and Beijing spoke of progress in talks late last week.

However, Reuters reported on Wednesday that a meeting between President Donald Trump and Chinese President Xi Jinping could be postponed until December — delaying a chance for the two leaders to sign an interim trade deal.

The world’s two largest economies have imposed tariffs on billions of dollars’ worth of one another’s goods since the start of 2018, battering financial markets and souring business and consumer sentiment.

The Trump administration has been putting increasing pressure on Beijing to curb massive subsidies to state-owned companies and stop the forced transfer of American technology to Chinese firms.

But, analysts are skeptical that a phase one trade deal will effectively tackle these issues, suggesting the two economic powers will need a more comprehensive agreement before market sentiment can be boosted sustainably.