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White House Enters Into Hopeful ?Phase 1? of China Trade Deal

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Unread 10.16.19, 05:31 PM
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White House Enters Into Hopeful ?Phase 1? of China Trade Deal

On 10.16.19 12:13 PM posted by Riley Walters

President Donald Trump announcedon Friday he has reached a tentative trade deal with Chinese negotiators.

This deal, labeled “phase one” of possibly two orthree phases, is supposed to be finalized and signed next month when Trump and ChinesePresident Xi Jinping meet in Santiago, Chile.

As an immediate part of the deal, the White House issuspending an increase of tariffs on $250 billion worth of imports from Chinathat would have gone into effect starting Oct. 15. The tariff rate on theseproducts will remain at 25% for now.

The White House has decided it won’t make a decision whetherto suspend additional tariffs scheduled for Dec. 15 just yet. And there hasbeen no discussion about when negotiators plan to start lowering the tariffsalready levied on almost $400 billion worth of goods Americans buy from China.

The removal of these tariffs should become a major part ofnegotiations as Americans continue to pay billions more each month.

According to Trump, China has also agreed to continue purchasing more U.S. agricultural products. Chinese purchases of U.S. agricultural products have been resuming as China’s farmers continue to battle an African swine flu and fall armyworm infestation that’s been destroying their pig and crop numbers.*

Treasury Secretary Steven Mnuchin clarifiedthat China will eventually buy between $40 to $50 billion worth of agriculturalproducts a year.

While there is no text for phase one of a deal with China,in principle, other parts of the deal will include addressing issues likenon-tariff barriers to U.S. agricultural exports to China, financial servicesand market accessibly, intellectual property protection, stopping the transferof technology, and possibly an agreement on currency manipulation.

Some of these issues will be covered in other phases aswell.

Many of the specifics will need to be worked out over thenext month via working-level meetings. Not only will the legal text need to beworked out, but implementation and enforcement measures will need to behammered out.

Ideally, Trump and Xi will sign phase one on the sidelinesof the Asia-Pacific Economic Cooperation summit on Nov. 16-17 in Santiago,Chile.

Immediately afterward, negotiations for phase two will likelybegin and potentially lead to a suspension of the Dec. 15 tariffs. The WhiteHouse has plans to place a 15% tariff on roughly $160 billion worth of goodsfrom China just before Christmas. These taxes would be on mostly consumer goodslike toys and video games.

The administration is maintaining its tough negotiatingstyle for now. If the last two years of trade talks has shown us anything, it’sthe low level of trust between U.S. and Chinese negotiators.

Perhaps that’s the reason why negotiators decided on aphased approach. Negotiators may find it necessary to have incremental agreementsof a China deal as they try to build confidence that the other side will committo a deal.

Already, negotiations fell apart in May when U.S.negotiators lost faith when Chinese negotiators backed away from what wasconsidered a mostly done deal. Some reportssuggest Chinese negotiators cut a 150-page deal down to 105 pages.

But still, the announcement of a phased deal with China maycome as a bit of surprise to some.

Since the beginning, Trump and his advisers have emphasized getting a large, comprehensive deal with China—one that’s not just about agricultural purchases but includes structural reforms as well.**

At least for now, there will be no new tariffs this week,and markets have been cautiously optimistic since the announcement of phase oneof the deal.

The post White House Enters Into Hopeful ‘Phase 1’ of China Trade Deal appeared first on The Daily Signal.

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