Rollback expected for some tariffs
U.S., China agree to initial trade deal in step to defuse spat
WASHINGTON — The U.S. and China have agreed that an initial trade deal between the two would roll back a portion of the tariffs placed on each others’ products, a significant step toward defusing tensions between the world’s two largest economies.
The so-called phase one agreement has not been finalized, and the exact terms are still under discussion. But the Trump administration has committed to rolling back tariffs if an agreement is reached, according to people familiar with the negotiations. The move suggests the two sides are getting closer to a deal that would provide relief to businesses and consumers that have struggled with the additional costs of tariffs.
The development comes as President Donald Trump and his Chinese counterpart, Xi Jinping, face increasing political and economic pressure to resolve their 19-month trade fight.
Investors have already begun anticipating some type of resolution. Stocks soared Thursday after the Chinese government said Beijing and the Trump administration had agreed to remove some tariffs as part of any deal reached between the two sides.
Gao Feng, a spokesman for China’s Commerce Ministry, said at his weekly news conference in Beijing that China is insisting that any deal include tariff reductions. He also said the U.S. had agreed to remove tariffs as part of an agreement.
“In the past two weeks, the leaders of the two sides have conducted a serious and constructive discussion on properly addressing the concerns of both sides and agreed to cancel the tariffs by stages in accordance with the development of the agreement,” he said.
Gao did not specify what tariffs might be dropped or when.
In October, Trump announced that he would cancel a planned tariff increase that month as part
of a first-phase trade deal, but he made no mention of the tariffs he had already placed on more than $360 billion of Chinese products.
Since then, the U.S. has begun considering rolling back tariffs put in place Sept. 1 on more than $100 billion of Chinese food, clothing, lawn mowers and other products, according to people briefed on the discussions.
Markets skyrocket
Markets are increasingly optimistic about the chances for a deal and have been rising steadily. On Wall Street, the S&P 500 was up more than a half a percentage point shortly after 12 p.m., to more than 3,090, putting it on track to hit a record closing high.
Shares of companies with close ties to China’s vast manufacturing base, such as semiconductor manufacturers and retailers, also rose.
Trump took notice Thursday, saying in a tweet, “Stock market up big today. A New Record. Enjoy!”
While markets are booming, farm and manufacturing states continue to struggle under the weight of Trump’s trade war.
The fight has brought the economies of several Farm Belt states to a near standstill, data released by the Commerce Department on Thursday showed. From the middle of 2018 through the middle of this year, growth in Iowa, Kansas and Nebraska slowed to less than 1 percent for the year, well below the more rapid expansions they enjoyed in the first half of 2018.
Burden for farmers
In the second quarter of this year, gross domestic product rose by an annual rate of just 1.1 percent in Wisconsin, Michigan, Iowa, Illinois and Georgia. GDP grew by just 1 percent in Indiana and Kentucky.
While the Trump administration has insisted that Americans are not bearing the brunt of the tariffs, business and farm groups disagree.
Lobbying group Tariffs Hurt the Heartland released a report this week that found that U.S. consumers and businesses have paid an additional $38 billion in tariffs between February 2018 and September 2019 as a result of the trade war.
“This data offers concrete proof that tariffs are taxes paid by American businesses, farmers and consumers — not by China,” said Jonathan Gold, spokesman for Americans for Free Trade. “This is why removing tariffs must be a part of the phase one deal.”
On Thursday, Gao said China will insist that any deal include canceling some tariffs, a subtle shift from his previous comments, which were somewhat less specific on what China required to reach any interim agreements.
“If China and the United States reach the first phase agreement, according to the content of the agreement, both sides should cancel added tariffs at the same time with the same proportion,” he said. “This is an important condition for reaching an agreement.”