U.S. reaches ‘deal in principle’ with China on trade: sources
Business leaders believe pact could be more limited than pledge from October
WASHINGTON The White House reached a “deal in principle” with Beijing on trade, sources briefed on the talks said on Thursday, but it may be narrower than the “phase one” deal U.S. President Donald Trump promised in October.
In the current deal, the United States would suspend tariffs expected to go into effect on US$160 billion in Chinese goods, and Beijing has promised to buy more U.S. agricultural goods, Bloomberg reported, without further details.
One former senior trade negotiator said the devil was in the details of the written agreement, which is still being worked out. “In trade negotiations, written text is important since that’s where a lot of the lingering disagreements tend to resurface.”
Trump has signed off on the deal, and a White House announcement could come shortly, one source said.
In an attempt to secure a “phase one” trade deal, U.S. negotiators earlier offered to cut existing tariffs on Chinese goods by as much as 50 per cent as well as suspend new tariffs that were scheduled to go into effect on Sunday, two people familiar with the negotiations said earlier on Thursday.
The U.s.-china trade war has slowed global growth and dampened profits and investment for companies around the world. The United States has announced US$28 billion in subsidies for farmers who were affected by the trade war.
China bought US$24 billion in U.S. farm products in 2017, before the trade war started, according to U.S. Department of Agriculture figures.
Trump said in a White House news conference on Oct. 11 with Chinese Vice Premier Liu He that the two countries had agreed to a “phase one” trade deal on “intellectual property, financial services” and a “purchase of from US$40 (billion) to US$50 billion worth of agricultural products.”
A written agreement would be available in weeks, Trump said then, adding, “we’ve agreed in principle to just about everything I mentioned, all of the different points.”
However, Beijing has balked at committing to buy a specific amount of agricultural goods during a certain time frame. Chinese officials said they would like the discretion to buy based on market conditions.
Officials from China have demanded the United States roll back tariffs that Trump put in place as a condition of any “phase one” deal. The Trump administration put tariffs on hundreds of billions of dollars in Chinese imports, starting in July 2018.
If Trump does not suspend the tariffs scheduled to go into effect on Dec. 15, Beijing officials will apply more tariffs on U.S. goods and may suspend talks until after the U.S. presidential election in November 2020, trade experts believe.
The Dec. 15 tariffs would apply to almost US$160 billion of Chinese imports such as video game consoles, computer monitors.
In August, China said it would impose five per cent and 10 per cent in additional tariffs on US$75 billion of U.S. goods in two batches. Tariffs on the first batch kicked in on Sept. 1, hitting U.S. goods including soybeans, pork, beef, chemicals and crude oil.
The tariffs on the second batch of products are due to be activated on Dec. 15, affecting goods ranging from corn and wheat to small aircraft and rare earth magnets.
China also said it will reapply on Dec. 15 an additional 25-per-cent tariff on U.s.-made vehicles and five-per-cent tariffs on auto parts that had been suspended at the beginning of 2019.
Business leaders who have grown anxious for relief from the trans-pacific tariff wars welcomed the news of a deal.
“That is excellent news. It puts a floor under the deterioration in the relationship,” said Craig Allen, president of the U.s.-china Business Council.
Myron Brilliant, executive vice-president of the U.S. Chamber of Commerce, said the deal would benefit American manufacturers and farmers. “It’s an important first step, but just a first step,” he said. “There is more work to be done.”
Even before a formal presidential decision to proceed, Republican critics of the so-called “phase one” agreement sounded the alarm.
Sen. Marco Rubio, a Florida Republican and member of the Senate Foreign Relations Committee, warned against settling too quickly with Beijing. “@Whitehouse should consider the risk that a near-term deal with #China would give away the tariff leverage needed for a broader agreement on the issues that matter the most such as subsidies to domestic firms, forced tech transfers & blocking U.S. firms access to key sectors,” Rubio tweeted.
Derek Scissors, a China hawk with the American Enterprise Institute and occasional administration adviser, accused the president of rushing to make a deal. “This is really weird,” Scissors said. “Technically, there’s been a deal on the table for the president to sign for some time. What’s changed is they think the president will say ‘yes.’ “
Early Thursday morning, Trump teased investors with word of a potential deal with China, sending the stock market briefly higher amid optimism about a breakthrough in the lengthy standoff.
“Getting VERY close to a BIG DEAL with China,” the president tweeted shortly after Wall Street opened. “They want it, and so do we!”
The Dow Jones industrial average quickly rose more than 300 points, or roughly one per cent, within the first hour of trading as financial markets cheered the prospect of a “phase one” deal with China. At close, the Dow Jones industrial average was up 220.75 points at 28,132.05 after hitting 28,224.95 in earlier trading.