Quiet, for now: On trade deal between US and China

The trade deal between the U.S. and China allows President Trump to claim some success

Published - January 18, 2020 12:02 am IST

The phase one trade deal U.S. President Donald Trump and Chinese Vice-Premier Liu He signed on Wednesday is but a temporary truce that leaves the key issues of the trade dispute unresolved. The pact that Mr. Trump has touted as a step toward creating a fairer and reciprocal partnership still leaves intact nearly three-fourths of punitive tariffs slapped on China since the onset of the trade rift in 2017. Even so, the limited terms the two largest economies agreed upon sets the political stage for further bilateral negotiations and to stem a further deterioration in the global growth scenario. China is to buy $200-billion in goods and services in the coming two years — purchases in 2017, were valued at some $187-billion. The proposed increase in exports is believed to be unprecedented in U.S. trade history and caused speculation on the impact these steep targets could have on China’s other trading partners. Agricultural exports form the smallest proportion of the latest offers relative to manufactured goods and services. This has been an important area of concern for the American farming sector ever since China imposed retaliatory tariffs on soyabean imports from the U.S. But Beijing has promised to open its markets in dairy products, poultry, fish and allied sectors. Whereas China has given assurances to remove barriers for American banking, insurance and other financial services, Washington would be more wary of guarantees on IP protection and alleged forced technology transfers; the last two have been among the more contentious aspects of the trade dispute, as seen in the attacks on Chinese telecom manufacturer Huawei. Separately, Washington has invoked provisions on threats to its national security to punish adversaries, an exceptional measure in the international trading arena. Crucially, the timing of the package enables Mr. Trump to claim some success in narrowing the trade deficit with China ahead of his November re-election bid.

Mr. Trump has said that negotiations on a phase two agreement would begin immediately and even hinted that he could travel to Beijing. However, questions over government control of China’s state-owned firms and industrial subsidies — at the core the bilateral dispute — are not expected to be resolved until after the 2020 U.S. Presidential elections. In parallel is the agreement to revive an erstwhile Obama-era mechanism for economic dialogue that was abandoned under the Trump administration. The step signals hope just as Washington’s decision this week to withdraw the tag of a currency manipulator upon Beijing, accusing it of artificially devaluing the renminbi to gain competitive advantage. The new forum could set the tone to address sensitive issues that have dogged Beijing’s relations with the U.S. and its allies after China joined the WTO.

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in


Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.