US, China sign 'phase one' trade deal, but most tariffs stay
Tariffs remain on around two-thirds of the goods Americans buy from China. Moreover, Washington's fundamental complaints about Chinese practices - from its approach to subsidising businesses to cybertheft - remain unresolved.
Washington and Beijing have signed an agreement aimed at putting the brakes on an 18-month trade war between the world’s two largest economies that had rattled markets worldwide and led to a global growth slowdown.
With provisions covering purchase commitments, financial market access, intellectual property protection and enforcement, the phase one deal was made final by US President Donald Trump and China’s chief trade negotiator, Vice-Premier Liu He, in Washington on Wednesday.
What is there in phase-one deal?
Included in the deal is a commitment from Beijing to buy, over two years, at least US$200 billion of American goods and services more than it did in 2017. Those additional purchases will be made up of around US$77 billion in manufacturing, US$52 billion in energy, US$32 billion in agricultural goods and US$38 billion in services.
The latter includes tourism, financial services and cloud services.
China has also agreed to take more action against counterfeiting and make it easier for companies to pursue legal action over trade secret theft
The deal will also result in the suspension of a planned December tariff on about US$162 billion in Chinese goods and halve an existing 15 per cent duty on imports worth around US$110 billion.
However the majority of the border taxes remain in place, which has prompted business groups to call for further talks.
The US and China have engaged in a tit-for-tat tariff war since 2018, which has led to extra import taxes being levied on more than $450bn worth of traded goods. The dispute disrupted trade flows, dampened global economic growth and unnerved investors.
White House, Beijing hail the deal:
Trump said the pact would be "transformative" for the US economy.
It has been hailed by the White House as a “breakthrough” in a war that President Trump triggered to protect American jobs and companies from what he viewed as unfair competition from China.
Chinese leaders also called it a "win-win" deal that would help foster better relations between the two countries.
The Chinese Vice Premier said the agreement was rooted in "equality and mutual respect" and defended his country's economic model in his remarks.
Though the US has signed a partial trade agreement with China, it doesn't mean simmering conflicts and uncertainty over trade won't drag down the global economy this year.
Tensions between the two nations are likely to persist in 2020 as Beijing and Washington enter a second round of trade talks that are expected to be more difficult than the "phase one" process, CNN reported.
The EU is also locked in its own trade dispute with the US that has strained ties between the preeminent western powers. And the UK's looming break with Europe brings with it a slew of challenges as the country attempts to forge a new relationship with its largest export market.
"Are we in an ideal spot? No," said Trump’s top trade negotiator Robert Lighthizer before the signing of the deal. "Is this a massively good first step? Yes."
But more specific details about the text of the agreement have been elusive. Economists, market analysts and trade experts also remain wary about whether the two countries can make serious headway on more substantial issues -- such as Washington's demand that the Chinese government significantly reduce its role in the country's economy.
Substantial tariffs are still in place:
The two sides are keeping substantial tariffs in place. About two-thirds of all US imports from China — roughly $370 billion worth — will still be covered by tariffs after the deal is signed, according to a December analysis from the Peterson Institute for International Economics. More than half of US exports to China would also still be subject to retaliatory tariffs, the institute said.
China and the US are already locked in a fight over Chinese tech company Huawei -- a leading global provider of telecoms equipment used to build 5G networks.
The Trump administration is also weighing whether to impose tariffs on $2.4 billion in French products — including cheeses, handbags and champagne — to punish the country for its new tax on digital services.
Washington had also already imposed taxes on steel and aluminum made in the EU and threatened higher tariffs on German cars.
China’s Xinhua news agency said in an editorial that the phase one deal showed China and the US are looking for “a more reasonable approach” to managing their differences. But it warned that the deal should only be considered “a good start” to address a dispute that is “long-term, complicated and arduous”.
Chinese tabloid the Global Times reiterated that this should not be viewed as a “one-sided win” and hoped that more than a dozen rounds of painstaking negotiations could be instructive for China and the US in “curbing the impulse for confrontation” in the future.
Again, though, there was no mention of phase two in any Chinese state media. Chinese analysts, however, accepted that this is where the real hard work will begin.
“The phase two deal may involve more difficult domestic regulatory issues such as subsidies, state-owned enterprises, and internet supervision,” said Wang Heng, a professor focused on trade law from the University of New South Wales in Australia.