The United States and China have announced an initial trade deal that will roll back some tariffs and boost Chinese purchases of US goods and services, defusing an 18-month conflict between the world’s two largest economies.
- The centrepiece of the deal is a pledge by China to purchase an additional $US200 billion of US farm products and other goods
- Mr Trump said China would buy $US40-50 billion in additional US services and $US75 billion more in manufacturing goods
- The deal fails to address many of the structural differences that led the Trump administration to start the trade war
Beijing and Washington portrayed their “Phase 1” agreement as a momentous step on Wednesday (local time) after months of start-stop talks punctuated by tit-for-tat tariffs that uprooted supply chains and stoked fears of a further slowdown in the global economy.
“Together we are righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers and families,” US President Donald Trump said as he touted the deal at the White House alongside Chinese Vice Premier Liu He and other officials.
The centrepiece of the deal is a pledge by China to purchase at least an additional $US200 billion ($290 billion) of US farm products and other goods and services over two years, over a baseline of $US186 billion in purchases in 2017.
The deal would include $US50 billion in additional orders for US agricultural products, Mr Trump said, adding he was confident that US farmers would be able to meet the greater demand.
He also said China would buy $US40 billion to $US50 billion in additional US services, $US75 billion more in manufacturing goods, and $US50 billion more of energy supplies.
Officials from both countries have touted the deal as ushering in a new era for US-Sino relations, but it fails to address many of the structural differences that led the Trump administration to start the trade war.
These differences include Beijing’s long-standing practice of propping up state-owned companies, and flooding international markets with low-priced goods.
Mr Trump, who has embraced an “America First” policy aimed at rebalancing global trade in favour of US companies and workers, said China had pledged action to confront the problem of pirated or counterfeited goods, and that the deal included strong protection of intellectual property rights.
Chinese President Xi Jinping told Mr Donald Trump in a letter, read by Chinese Vice Premier Liu He at the signing of the deal in Washington, that he welcomes the Phase 1 trade deal reached with the US.
Mr Xi also told Mr Trump in the letter that he is willing to stay in close touch with the American leader and that the agreement shows how the two countries can resolve their differences and find solutions based on dialogue.
Meanwhile, Charles Schumer the Senate Minority Leader, slammed the news of the trade deal saying it “does next to nothing of substance for workers feeling the brutal, merciless weight of China’s trade and industrial abuse.”
Mr Schumer added: “I greatly fear that President Xi is laughing at us behind our backs for having given away so little at the expense of American workers, farmers and businesses.”
‘Radical shift in Chinese spending unlikely’
Earlier, top White House economic adviser Larry Kudlow told Fox News the agreement would add 0.5 percentage points to US gross domestic product growth in both 2020 and 2021.
But some analysts have expressed scepticism it will set US-China trade on a new trajectory.
“I find a radical shift in Chinese spending unlikely. I have low expectations for meeting stated goals,” said Jim Paulsen, chief investment strategist at Leuthold Group in Minneapolis.
“But I do think the whole negotiation has moved the football forward for both the US and China.”
The deal doesn’t end retaliatory tariffs on American farm exports, makes farmers “increasingly reliant” on Chinese state-controlled purchases, and doesn’t address “big structural changes,” Michelle Erickson-Jones, a wheat farmer and spokeswoman for Farmers for Free Trade, said in a statement.
The Phase 1 deal, reached in December, cancelled planned US tariffs on Chinese-made cell-phones, toys and laptop computers and halved the tariff rate to 7.5 per cent on about $US120 billion worth of other Chinese goods, including flat panel televisions, Bluetooth headphones and footwear.
But it will leave in place 25 per cent tariffs on a vast, $US250 billion array of Chinese industrial goods and components used by US manufacturers, and China’s retaliatory tariffs on over $US100 billion in US goods.
Market turmoil and reduced investment tied to the trade war cut global growth in 2019 to its lowest rate since the 2008-2009 financial crisis, the International Monetary Fund said in October.
Tariffs on Chinese imports have cost US companies $US46 billion. Evidence is mounting that tariffs have raised input costs for US manufacturers, eroding their competitiveness.
Mr Trump, who has been touting the Phase 1 deal as a pillar of his 2020 re-election campaign said he would agree to remove the remaining tariffs once the two sides had negotiated a “Phase 2” agreement.
He added that those negotiations would start soon.
He also said he would visit China in the not-too-distant future.