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China and US reach trade deal

“Phase one” trade deal between U.S. and China includes suspension of planned Dec. 15 tariff round, and negotiations on a phase two deal will begin immediately, says President Trump.

President Donald Trump and Chinese officials said they have reached a deal that will not impose additional tariffs on Chinese imports on Dec. 15.

Trump said on Twitter it was an “amazing deal.” 

“We have agreed to a very large Phase One Deal with China. They have agreed to many structural changes and massive purchases of Agricultural Product, Energy, and Manufactured Goods, plus much more. The 25% Tariffs will remain as is, with 7 1/2% put on much of the remainder,” Trump tweeted.

“The Penalty Tariffs set for December 15th will not be charged because of the fact that we made the deal. We will begin negotiations on the Phase Two Deal immediately, rather than waiting until after the 2020 Election,” added Trump.

The office of U.S. Trade Representative (USTR) Robert Lighthizer said the deal “requires structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange.”

“The phase one agreement also includes a commitment by China that it will make substantial additional purchases of U.S. goods and services in the coming years,” said the USTR. “Importantly, the agreement establishes a strong dispute resolution system that ensures prompt and effective implementation and enforcement.”

It added that the U.S. has agreed to modify its Section 301 tariff actions in a significant way.

The deal “marks critical progress toward a more balanced trade relationship and a more level playing field for American workers and companies,” said Treasury Secretary Steven Mnuchin.

The United States first imposed tariffs on imports from China based on the findings of the Section 301 investigation on China’s acts, policies and practices related to technology transfer, intellectual property and innovation. The United States will be maintaining 25% tariffs on approximately $250 billion of Chinese imports, along with 7.5% tariffs on approximately $120 billion of Chinese imports.

According to scattered news reports citing unnamed sources, the president, along with  Lighthizer, Mnuchin and White House advisers Peter Navarro and Larry Kudlow, huddled in the White House in the afternoon Dec. 12 to finalize and sign off on the phase one deal.

“A phase one deal is welcome news for the retail industry, particularly amid the robust holiday shopping season,” said Austen Jensen, the Retail Industry Leaders Association’s senior vice president of government affairs, in a statement. “For months, retailers have been operating in a state of uncertainty about their supply chains and have done their best to prevent customers from bearing the cost of these tariffs.”

According to Tariffs Hurt the Heartland, Americans spent $7.2 billion to cover the cost of existing tariffs on Chinese goods imports in October, while they spent more than $42 billion to cover tariffs between February 2018 and October 2019.

“Our members — be they manufacturers, importers, exporters, wholesalers, larger companies or small companies — have pointed to the extraordinary costs associated with the tariffs as creating enormous problems for their businesses,” wrote Rick Helfenbein, president and CEO of the American Apparel and Footwear Association, in a Dec. 12 letter to Trump. “These costs, many of which were suddenly imposed, stifle investments, impede market access, lead to the loss of American jobs and raise prices for American families.

“The uncertainty associated with the [U.S.-China trade] talks only magnifies the pain by forcing companies to create and constantly revisit multiple tariff mitigation scenarios,” he added.

While the tariffs caused some shrinkage of U.S. imports of Chinese goods in 2019, the biggest losers, according to many trade associations, has been American exporters, particularly those in agriculture. Chinese tariffs on American exports have totaled $12 billion since February 2018 and have primarily focused on agricultural exports.

“This is an encouraging first phase that puts a floor under further deterioration of the bilateral relationship,” said Craig Allen, president of the U.S.-China Business Council. “But this is just the beginning. The issues facing the U.S. and China are complex and multifaceted. They are unlikely to all be resolved quickly. Both sides must commit to developing a new paradigm and economic relationship that addresses the significant challenges and issues American businesses face in China today.”

Allen added, “We urge both governments to build on this progress and expedite a phase two agreement on structural reforms. We’re pleased to see the agreement includes a built-in agenda with continued monitoring and enforcement mechanisms that provide a fact-based process for resolving noncompliance with commitments.”

Zippy Duvall, president of the American Farm Bureau, noted that “China went from the second-largest market for U.S. agricultural products to the fifth largest since the trade war began. Reopening the door to trade with China and others is key to helping farmers and ranchers get back on their feet. Farmers would much rather farm for the marketplace and not have to rely on government trade aid, so today’s news is especially welcome.

“We are eager to learn the details of China’s commitment to purchase more agricultural products. American agriculture has been caught in the trade war crosshairs and it’s time to turn the page,” Duvall added. “We encourage the administration to continue building on today’s announced progress and aggressively pursue a full trade agreement with China and other partners around the world.”


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