It seems that a trade war that has lasted for nearly two years may be finally coming to an end. It has been one week since the Phase One trade deal was signed at the White House by President Donald Trump and Chinese Vice Premier Liu He. The agreement was meant to reduce tensions after a trade war that has lasted nearly two years with President Trump hailing it as a win for the U.S. economy. However, uncertainty and most tariffs remain.
Phase One includes a pledge from China to purchase at lease an additional $12.5 billion worth of agricultural goods in 2020 and at least $19.5 billion over the level of $24 billion in 2021. This was one of President Trump’s major talking points in the weeks leading up to this deal. However, during the ceremony Chinese Vice Premier Liu He said China will buy “based on market conditions”. This lack of specific purchase contracts has created some concerns among experts.
Along with the pledges to purchase from China, the deal canceled planned U.S. tariffs on cellphones, toys and laptop computers. It also halved the tariff rate to 7.5% on about $120 billion worth of Chinese goods. While this is a step in the right direction 25% tariffs on a $250 billon array of Chinese good and components and China’s retaliatory tariffs on over $100 billion in U.S. good are still in place. While China has not committed to any reductions in their tariffs, they have said they will put into place exemptions in order to meet purchasing targets. It has been said that the U.S. will plan to remove tariffs once Phase Two is complete, however, there is no concrete timeline for Phase Two.
China is also willing to speed up the review on agricultural products it imports to two years. This is an update from the previous seven years that was needed for approval. There have also been requirements for beef shipments that will be eliminated along with easing the limits on the use of hormones in cattle. All of this is in hopes that this will make the U.S. beef and agricultural products eligible for export to China increasing trade.
While many see that Phase One has failed to address many of the issues that led to the conflict and that it doesn’t eliminate the tariffs it is still hopefully a step in the right direction. While negations for Phase Two could start at any time, President Trump has stated he would prefer to wait until after the election to finalize another part of this agreement.