WASHINGTON: The United States and China signed an initial trade deal on Wednesday that will roll back some tariffs and boost Chinese purchases of US products, defusing an 18-month row between the world’s two largest economies but leaving a number of sore spots unresolved.
Beijing and Washington touted the “Phase 1” agreement as a step forward after months of start-and-stop talks, and investors greeted the news with relief. Even so, there was scepticism the US-China trade relationship was now firmly on the mend.
The deal fails to address structural economic issues that led to the trade conflict, does not fully eliminate the tariffs that have slowed the global economy, and sets hard-to-achieve purchase targets, analysts and industry leaders said.
While acknowledging the need for further negotiations with China to solve a host of other problems, President Donald Trump hailed the agreement as a win for the US economy and his administration’s trade policies.
“Together, we are righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers and families,” Trump said in rambling remarks at the White House alongside US and Chinese officials.
Chinese Vice Premier Liu He read a letter from President Xi Jinping in which the Chinese leader praised the deal as a sign that the two countries could resolve their differences with dialogue.
The centerpiece of the deal is a pledge by China to purchase at least an additional US$200 bil worth of US farm products and other goods and services over two years, above a baseline of US$186 bil in purchases in 2017, the White House said.
Commitments include US$54 bil in additional energy purchases, US$78 bil in additional manufacturing purchases, US$32 bil more in farm products, and US$38 bil in services, according to a deal document released by the White House.
Liu said Chinese companies would buy US$40 bil in US agricultural products annually over the next two years “based on market conditions.” Beijing had balked at committing to buy set amounts of US farm goods earlier, and has inked new soybean contracts with Brazil since the trade war started.
Key world stock market indexes climbed to record highs on hopes the deal would reduce tensions, before closing below those highs, while oil prices slid on doubts the pact will spur world economic growth and boost crude demand.
Soybean futures, which traded 0.4% lower throughout much of the deal signing ceremony, sank even further after Liu’s remarks, a sign that farmers and traders were dubious about the purchase goals.
The deal does not end retaliatory tariffs on American farm exports, makes farmers “increasingly reliant” on Chinese state-controlled purchases, and does not address “big structural changes,” Michelle Erickson-Jones, a wheat farmer and spokeswoman for Farmers for Free Trade, said in a statement.
Trump and his economic advisers had pledged to attack Beijing’s long-standing practice of propping up state-owned companies and flooding international markets with low-priced goods as the trade war heated up.
Although the deal could be a boost to US farmers, automakers and heavy equipment manufacturers, some analysts question China’s ability to divert imports from other trading partners to the United States. – Jan 16, 2020, Reuters