Mini-deal puts US-China trade war on hold
Fears agreement is a delaying tactic employed by the Communist Party
A truce in the US-China trade war offers Xi Jinping breathing space as he faces a slowing economy and political trouble in Hong Kong, but experts warn 2020 will be another tough year for the Chinese president.
The pared-down “phase one” deal announced on Friday includes a reduction in US tariffs on China, in exchange for an increase in Chinese purchases of US goods and better protection for intellectual property.
But tussles over the most controversial Chinese trade practices, including steep state subsidies, have been left to future talks.
The trade war, launched nearly two years ago by President
Donald Trump, isn’t over, analysts say, as there’s always the risk of Beijing not upholding its end of the bargain and the mercurial US leader throwing more tariff bombs.
The mini-deal is a “delay tactic to buy the Chinese Communist Party breathing space and allow it to stay in the game against overwhelming odds,” said analyst Larry Ong, senior analyst with risk consultancy SinoInsider.
Growth of the Chinese economy slowed to 6% in the third quarter — its most sluggish rate in nearly three decades as demand for exports cooled and Chinese consumers tightened their belts.
In November exports fell 1.1% from a year earlier, the fourth straight fall, and exports to the US nosedived 23% as the trade war disrupted supply chains and left investors on edge.
Trump has cancelled a new round of tariffs that had been — due to kick in on Sunday and would have affected smartphones, toys and laptops among other goods, while Beijing also called off levies planned in retaliation.
In another major concession, Washington will slash in half the 15% tariffs imposed on $120bn (R1.7 trillion) in Chinese goods, such as clothing, that were imposed on September 1.
However, this “unexpected” tariff rollback will have a marginal impact on China’s economy, said Lu Ting of Nomura bank.
“The worst is not yet over and 2020 looks set to be yet another tough year.”
On the political front, Washington’s
decisions to back the pro-democracy movement in Hong Kong and to criticise China’s mass detention of mostly Muslim minorities has cast a shadow over trade negotiations.
Xi has faced six months of increasingly violent demonstrations in Hong Kong, while on the other side of the world Trump is facing a congressional vote on impeachment for abuse of office next week.
And with Trump’s 2020 reelection campaign gathering pace, he needs to show voters that his habit of starting bruising trade wars is bearing fruit.
US officials said China has promised to import $200bn (R2.9 trillion) worth of US goods including farm produce, energy and services over the next two years, but China declined to offer any details. Starting talk on the next phase “will depend on the implementation of the phase one agreement”, China’s deputy finance minister, Liao Min, said.
Ong said the Chinese Communist Party was notorious for not living up to its promises and warned factional struggles among the party would make it harder to meet China’s “phase one” deal commitments.
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