The temporary agreement between the US and China to slash the severe reciprocal tariffs imposed on each other and to cooperate to prevent further disruption to the global economy should have a positive impact on trade, according to an analyst.

The move should ease the strain on global supply chains, which faced uncertainty as shippers did not know whether their goods would be accepted due to the US tariffs.

However, uncertainty will remain until the two nations hold a second round of negotiations, said Sompop Manarungsan, an analyst covering the Chinese and US economies.

"The temporary agreement on tariffs has left many countries including Thailand feeling both relieved and concerned," he said.

"The relief stems from a clearer stance between the two largest adversaries in the tariff war. However, the concern is related to uncertainty about the second round of talks."

According to Mr Sompop, the agreement helps stabilise the global supply chain and reduces negative impacts on the logistics system, including inventory management, as businesses stocked up before the tariffs came into effect.

Marketing management should also become easier, referring to the trend of consumers hoarding goods because they were worried prices would rise due to the tariffs, he said.

The pact also affects transport systems, which had been congested during this period, said Mr Sompop.

The US tariffs also affected demand in the US, leading to product shortages on store shelves.

In the financial sector, the measures have diminished the US's status as a safe haven, as capital outflows from the US over the past few months strengthened other currencies, such as the yen, Taiwanese dollar and the baht.

China was also affected, particularly its small and medium-sized enterprises (SMEs).

The US tariffs stunted the economy in Yiwu, the world's largest wholesale market located in Zhejiang province, to the point that the area was described as a ghost town, he said.

If this downturn drags on, it could result in up to 10 million job losses in China, said Mr Sompop.

He said a key factor driving the US to accelerate negotiations with China is the upcoming summer holiday season in the US, when many Americans travel or go camping.

A large number of camping goods are imported into the US from China, and if tariffs remain in place, Americans may face shortages of these products, potentially triggering a public backlash against the US government.

Walmart indicated its current inventory will only last another 2-4 weeks.

In addition, US budget discussions are expected to continue over the next few months, with the 2026 plan calling for US$7 trillion in expenditure, $5 trillion in revenue and a $2-trillion deficit, said Mr Sompop.

This amount does not include $7 trillion in maturing debt that will need to be refinanced and rolled over this year, he said.

If the two sides do not reach a resolution in a second round of talks, both positive and negative effects are projected for the global supply chain, said Mr Sompop.

On the positive side, if fewer Chinese products are shipped to the US, their prices may drop and they may be exported to other countries instead, he said.

However, if these are final products, it could negatively affect manufacturing in importing countries, as these imports compete directly with goods produced by local SMEs, said Mr Sompop.

If the exports are component parts, it could benefit local manufacturing due to lower costs. On the other hand, the US is accusing several products exported by Southeast Asian nations of having a high level of Chinese content, seeking to evade trade barriers, which could blunt the advantage of cheap components, he said.

"If the US and China can reach a resolution before the end of the 90-day pause granted to other countries, it would serve as a benchmark for those nations and help them prepare to manage their own supply chains," said Mr Sompop.

Source: Bangkok Post