US and China sign deal to ease trade war
President Donald Trump yesterday signed a partial trade deal with China, securing a promise that Beijing will purchase specific amounts of US goods and services while retaining many of the import penalties he put in place over the past two years.
The 86-page agreement, which comes after a tense standoff between both nations, marks a major shift in the “free trade” approach that past presidents have sought. Instead, Trump has attempted to lock in specific commitments from China’s government in a move away from a markets-based approach.
“Today we take a momentous step, one that has never been taken before with China, towards a future of fair and reciprocal trade,” Trump said. He called it a “sea change in international trade”.
At the signing, Chinese Vice Premier Liu He read a letter from Chinese leader Xi Jinping, who said the deal reflects “mutual respect” between the two countries. The letter said Xi hoped the US would “treat fairly” Chinese companies that attempt to do business with US firms.
A key component of the new deal will be China’s commitment to purchase an additional $200 billion in American exports above previous levels.
The Chinese have agreed to dollar targets for services as well as farm, energy and manufactured goods. New sales for American farmers alone are expected to near $40b in the first year, up from $24b.
Robert Lighthizer, the president’s chief trade negotiator, called the deal an “amazing agreement” and “real reform”.
The administration is not making public all details of the agreed Chinese purchases, but it did list specific targets for a range of industries in 2020 and 2021.
That is unusual for a US trade agreement and is just the latest indication of how Trump’s embrace of “managed trade” is breaking new ground.
“Trump has shattered orthodoxy on trade right and left since 2017,” said Claude Barfield, a former US trade official. “. . . It leaves the US open to charges of hypocrisy on state capitalism and government intervention.”
A key plank of Trump’s 2016 presidential campaign was a vow to force Beijing to change its economic policies, which the president said have disadvantaged US workers and companies for decades. The trade deal signed on yesterday stops short of some of the structural changes to Beijing’s economy that Trump sought, but will require China to purchase more US goods and services, a change Trump has promised will be a boon to US companies before the November election.
The avalanche of spending will mark a huge increase over the $128 billion China devoted to American goods in 2017.
The president has boasted about his interventionist approach on the campaign trail.
“My people wanted $20 billion in purchases. That’s a lot of money. That’s a lot of corn. Twenty billion dollars. And I said, ‘Make it 50’,” Trump said in Toledo earlier this month. “And China heard me, and they said OK.”