US President Donald Trump announced Friday a “very substantial phase one” deal to end the yearlong trade war with China in which the US will shelve higher tariff on Chinese goods slated to go into effect next week and Beijing will buy American agricultural produce with billions.
This initial deal is expected to be signed by Trump and Chinese President Xi Jinping when they meet in November in Chile for the Asia-Pacific Economic Cooperation summit. Phase two of the deal will follow “almost immediately” after phase one. Trump said there could be a third phase if needed.
“We’ve come to a very substantial phase one deal,” US President Trump told reporters in joint remarks with the Chinese chief negotiator, Vice-Premier Liu He, in the Oval Office.
Breaking up difficult and protracted trade negotiation into multiple phases or stages appears to be a template for trade discussions with India. Both sides have said they are looking at a tariff deal in the near term and an ambitious Free Trade Agreement over a longer term — or, as Trump recently said, a “larger deal down the road”.
The Friday announcement halts, if not ends, the escalation in the trade dispute between the world’s two largest economies triggered last March by US President Trump’s announcement of tariffs on Chinese goods over a litany of long-standing issues such as US companies forced to part with patented technology to operate in China and theft of intellectual property. Beijing had retaliated with it own tariffs, strategically targeting one of Trump’s key political constituencies: farmers.
It had rattled Trump enough to accuse Beijing to political interference. And relief for US farmers was China’s most significant concession in the deal announced by Trump Friday.
As part of this deal, China will buy American agricultural produce worth $40 billion or $50 billion annually, give an unspecified undertaking on how it handles its currency, offer protection of intellectual property rights of American businesses and grant foreign institutions access to its financial sector.
In return, the United States will not implement the higher import duty of 30%, going up from the present 25%, on $250 billion worth of Chinese goods.
These are still only understandings and the two sides have to formalize them in an agreement that Trump said he hoped to sign with Xi in Chile.
The deal announced by Trump — amidst spiraling political problems stemming from an impeachment inquiry and an economic slowdown — was not quite the “comprehensive” or a “whole” agreement the president had long maintained was his uncompromising goal.
The Wall Street Journal reported that the deal was asplitting up the negotiations into several parts was a Chinese suggested. It’s chief negotiator Vice-Premier Liu, has long maintained that 40% of the trade dispute with the US could be resolved immediately and 40% over a longer period.
It were the Chinese again who asked for issues related to national security — such as Huawei — be put on a separate track. American officials told reporters Huawei, the Chinese IT company whose 5G technologies are facing a US-led boycott in in the west because of its links to the Chinese government.
Vice Premies Liu also delivered to Trump a personal letter from Xi, who is currently in Mahabalipuram, India for an informal summit with Prime Minister Narendra Modi, “I attach great importance to your concerns on agricultural products,” Xi said in the letter according to the White House. “Recently, the Chinese companies involved have accelerated purchases of American agricultural products, including soybeans and pork.”
