Trade Truce? China and America Have a Small Trade Deal—but Will It Last?

Stratfor Worldview

The United States and China moved Dec. 12 to soothe the sting of their trade war, agreeing in principle to a so-called "phase one" trade deal that would ease the reciprocal tariffs that have reverberated through the world economy for almost two years. One crucial aspect of the deal is an agreement by the United States to suspend additional tariffs set to take effect Dec. 15 and, crucially, reduce some of the tariffs already in place on some $360 billion in Chinese goods. And thanks to the deal, Washington and Beijing might finally have exited their tit-for-tat tariff escalations, although clouds remain on the horizon: After all, the scope of the phase one deal is narrow, and the two sides will struggle to agree to a more comprehensive deal — portending perhaps even more disruptive battles in the tech supply chain in the year to come.

What's in the Deal

Although officials did not provide text of the agreement that was authorized by U.S. President Donald Trump, Washington has reportedly agreed to cancel a new round of 15 percent tariffs on $160 billion worth of Chinese products — mainly consumer goods. According to leaks of the deal's details, the United States will also cut existing tariffs of 25 percent on $250 billion in Chinese products to 12.5 percent and of 15 percent on another $112 billion in goods to 7.5 percent. In return, China has reportedly made an oral agreement to purchase $50 billion in U.S. agricultural products in 2020. Plus, China promised to broaden access to its financial sector and better protect U.S. intellectual property rights. The sides could sign an outline of the deal as early as Dec. 13.

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