WASHINGTON – The U.S. and China signed a limited trade deal Wednesday, signaling a pause in the nearly two-year trade war between the world's two largest economies and setting the stage for talks for a broader agreement down the road.
The “Phase One” agreement, the product of months of negotiations between officials in Washington and Beijing, calls for China to purchase an additional $200 billion worth of U.S. goods and services over the next two years, including another $32 billion in agriculture products.
China also promised not to pressure foreign companies to turn over their intellectual property for the right to do business there and to refrain from devaluing its currency to give its companies an advantage over foreign competitors.
“Today we take a momentous step – one that has never been taken before with China – toward a future of fair and reciprocal trade,” President Donald Trump said in a White House signing ceremony with Chinese Vice Premier Liu He.
Speaking through a translator, Liu read a message from Chinese President Xi Jinping, who said the deal “is good for China, for the U.S. and for the world."
Trump said he would travel to China soon as the two sides try to negotiate a broader agreement to deal with unresolved issues, such as complaints that China subsidizes its companies to give them an unfair advantage over foreign businesses. A broader deal is not expected to be finalized until after the November election.
Meanwhile, the U.S. will keep in place most of the tariffs it imposed on $360 billion in Chinese products as trade tensions between the two countries escalated over the past 18 months. But Trump said those tariffs could be removed if a broader deal is reached.
The limited agreement signed Wednesday allows Trump to claim a political victory as he faces an impeachment trial in the Senate and gears up for the November election. But analysts question how much the U.S. really got out of the deal.
“This is largely a deal on Chinese terms,” said Robert Daly, director of the Wilson Center’s Kissinger Institute on China and the United States, a non-profit research organization that seeks to promote better U.S.-China relations. “There is nothing we know about this deal that China wouldn’t like. And there is nothing we know about this deal that China probably wouldn’t have been willing to do some time ago.”
U.S. consumers won’t get much of a financial reprieve from the deal, economists say, because while the truce helps consumers avoid the pain of further tariffs, it doesn't erase all the earlier ones.
“The most important element of this deal is what didn't happen: further tariffs," says Gregory Daco, chief U.S. economist at Oxford Economics. "The risk of more tariffs isn’t going to materialize, and that’s the biggest gain for Americans.”
Other critics said the deal is only an election-year placeholder designed to push the toughest trade issues beyond Trump's reelection bid.
"All the big trade issues between the U.S. and China remain unaddressed and punted into the future," said David Rothkopf, a senior trade official in President Bill Clinton's administration. "It is a Potemkin Deal, a sham."
Trump, however, insisted the agreement is “a transformative deal" and said it would benefit American farmers, manufacturers and other workers who have been hurt by China's unfair trade practices.
Trump and Chinese officials announced the agreement in mid-December, signaling the first signs of a pause in trade tensions that rattled financial markets across the globe.
For months, the two countries hit each other with punishing tariffs in a trade war triggered by U.S. accusations that Beijing steals technology from American companies and pressures them to hand over trade secrets so they can do business in China.
At the height of the dispute, Trump set tariffs on more than $360 billion in Chinese imports, including farm equipment, motorcycles, mopeds, electronics, plastics and washing machines. China retaliated with tariffs on more than $110 billion worth of U.S. goods, including agriculture products, cars, auto parts, chemicals, whiskey, cigars, clothing and TVs.
As part of the Phase One deal, the U.S. agreed to shelve plans for tariffs on another $160 billion in Chinese goods that had been set to take effect Dec. 15. The U.S. also said it would cut by half the 15% tariff rate it imposed on $120 billion of Chinese goods Sept. 1.
China promised to buy an additional $200 billion in American goods and services over the next two years. Roughly $87 billion of that will be in U.S. manufactured goods, including industrial machinery, iron and steel and vehicles.
Another $32 billion of the Chinese purchases will be in agriculture products, such as oil seeds, meat, cereals and cotton; $52 billion will be in U.S. energy goods, including liquefied natural gas, crude oil and other refined products; and $38 billion will be in services such as business travel, financial services and insurance.
China also promised to open its financial markets to U.S. companies, address concerns about protecting the intellectual property of American companies doing business there and enact new guidelines for how it manages its currency.
But analysts remain skeptical.
Most of the agreement involves China making commitments to change its practices on matters such as forced technology transfers and intellectual property protection, but it's unclear how the U.S. can make sure China follows through, said Chad Bown, a senior fellow with the Peterson Institute for International Economics, a nonpartisan, nonprofit think tank in Washington, D.C.
There are enforcement mechanisms in the agreement, but no one seems to know how they might be applied if the U.S. believes China is in violation, Bown said.
"There are still a lot of open questions as to how this going to work in practice," he said.
China has a long history of failing to buy as many U.S. products as it has promised, Daly said, and even if the Chinese live up to their commitments this time, there remain questions about whether U.S. farmers could produce enough crops to fill their orders.
What's more, critics said, the issues still on the table will be difficult to resolve and raise questions about whether a broader agreement can be reached.
“If we make significant progress, that would be a very good thing,” said Craig Allen, president of the U.S.-China Business Council, a nonprofit group representing American companies that do business in China.
But "these are very difficult issues," Allen said. "We have a hard time getting along even with the Canadians. How are we going to resolve all of these issues with the Chinese?”
Contributing: Jessica Menton
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This article originally appeared on USA TODAY: China trade deal: U.S., China sign limited 'Phase One' agreement