Trump signs initial trade deal with China

Agreement preserves bulk of tariffs on $360 billion of goods

WASHINGTON — President Donald Trump signed an initial trade deal with China on Wednesday, bringing the first chapter of a protracted and economically damaging fight with one of the world’s largest economies to a close.

The pact is intended to open Chinese markets to more U.S. companies, increase farm and energy exports, and provide greater protection for U.S. technology and trade secrets. China has committed to purchasing an additional $200 billion worth of U.S. goods and services by 2021 and is expected to ease some of the tariffs it has placed U.S. products.

But the agreement preserves the bulk of tariffs that Trump has placed on $360 billion worth of Chinese goods, and it maintains the threat of additional punishment if Beijing does not live up to the terms of the deal.

“Today we take a momentous step, one that has never been taken before with China, toward a future of fair and reciprocal trade with China,” Trump said at a ceremony at the White House. “Together we are righting the wrongs of the past.”

The deal caps more than two years of tense negotiations and escalating threats that at times seemed destined to plunge the United States and China into a permanent economic war. Trump, who campaigned for president in 2016 on a promise to get tough on China, pushed his negotiators to rewrite trade terms that he said had destroyed American industry and jobs, and he imposed record tariffs on Chinese goods in a gamble to get Beijing to accede to his demands.

“As a candidate for president I vowed strong action,” Trump said. “Unlike those who came before me, I kept my promise.”

The agreement is a significant turning point in U.S. trade policy and the types of free trade agreements that the United States has typically supported. Rather than lowering tariffs and other economic barriers to allow for the flow of goods and services to meet market demand, this deal leaves a record level of tariffs in place and forces China to buy $200 billion worth of specific products within two years.

To Trump and other supporters, the approach corrects for past trade deals that enabled corporate outsourcing and led to lost jobs and industries. To critics, it is the type of managed trade approach that the United States has long criticized, especially with regard to China and its control over its economy.

Rather than trying to change China’s approach, it leans into it by requiring Beijing to buy set amounts of certain goods and services. The text of the agreement stipulates that “China

shall ensure” purchases and imports into China meet that $200 billion figure by 2021.

The deal also does little to resolve more pernicious structural issues surrounding China’s approach, particularly its pattern of subsidizing and supporting key industries that compete with U.S. firms, like solar energy and steel. U.S. businesses blame those economic practices for allowing cheap Chinese goods to flood the U.S. market, putting domestic firms out of business.

Instead, like the presidents who preceded him, Trump plans to rely on allies and the World Trade Organization to try to push China to change its ways.

“A ceremony at the White House can’t hide the stark truth about the ‘phase one’ China trade deal: The deal does absolutely nothing to curtail China’s subsidies to its manufacturers,” Scott Paul, president of the Alliance for American Manufacturing, which manufacturers and United Steelworkers, said in a tweet. “All those ‘forgotten men and women’ in U.S. factories have, once again, been

forgotten.”

The president’s approach may pay off politically. He will head into a reelection campaign with a commitment from China to strengthen its intellectualproperty protections, make large purchases of U.S. products and pursue other economic changes that will benefit American business. Even before the deal was signed, Trump’s supporters said the president took China on and won.

At a lavish White House ceremony crowded with Cabinet members, lawmakers and executives from America’s biggest companies, Trump seized on the signing as a counterweight to impeachment proceedings that were taking place across town, where lawmakers were about to vote to approve House prosecutors for a Senate trial.

“They have a hoax going on over there — let’s take care of it,” he said.

But the agreement has plenty of critics in both parties, who say that Trump’s tactics have been haphazard and economically damaging and that the agreement leaves many important economic issues unresolved.

That includes cybersecurity and China’s tight controls over how companies handle data and cloud computing. China rejected U.S. demands to include promises to refrain from hacking U.S. firms in the text, insisting it was not a trade issue.

The administration has said it will address some of these changes in Phase 2 of the negotiations and is keeping tariffs in place in part to maintain leverage for the next round of talks. Trump said if the two sides could reach agreement on the next phase, all of the tariffs he has placed on China would come off.

“I will agree to take those tariffs off if we’re able to do Phase 2,” he said.

But Trump has already kicked the deadline for another agreement past the November election, and there is deep skepticism that the two countries will reach another trade deal anytime soon.

In the interim, the remaining tariffs will continue to inflict financial pain on U.S. businesses that rely on Chinese imports and the consumers who buy their products.