President Trump on Wednesday signed “phase one” of a trade deal with Beijing, giving the president a partial victory on one of the main economic policy efforts of his administration. China is expected to purchase more than $200 billion in U.S. goods and services as part of the deal.
“Together, we are righting the wrongs of the past and delivering a future of economic justice and security,” Trump said at a White House signing event with Chinese Vice Premier Liu He. “Our negotiations were tough, honest and respectful, leading to this breakthrough.”
Several issues remain unresolved, however, and getting a follow-up trade deal is uncertain with the 2020 election looming.
Treasury Secretary Steven Mnuchin said Wednesday that finishing the first part would put pressure on China to address the remaining issues in order to get the U.S. tariffs lifted. “The first step is really focusing on enforcement, but this gives China a big incentive to get back to the table and agree to the additional issues that are still unresolved,” he told CNBC.
The White House has claimed that “phase one” covered many of the trade disputes that originally led the Trump administration and many in Congress to favor a confrontation with China, such as financial services, currency manipulation, intellectual property rights, and forced transfers of technology, among other subjects. The fine print of the deal is set to be made public today following the signing, according to White House officials.
China is expected to purchase between $40-$50 billion in U.S. farm goods. White House economic adviser Larry Kudlow said Wednesday that China would also buy $40 billion in services, $50 billion in energy products, and between $75 billion to $80 billion worth of manufacturing goods.
“A number of regulatory changes are being made [in China],” Kudlow said. “There are a number of very important reforms in here that can be easily monitored.”
The administration has rolled back some of its tariffs on Chinese goods and indefinitely postponed others. It also removed China from the official list of countries that manipulate their currencies.
Business groups applauded the administration but noted that Beijing still had to be held to its commitment. “The NAM looks forward to reviewing the final text of this agreement and to working with the administration in holding China accountable for its ambitious commitments,” said National Association of Manufacturers President Jay Timmons.
The United States nevertheless has maintained 7.5% tariffs on $120 billion worth of Chinese goods and 25% tariffs on another $250 billion worth of products. China has tariffs of between 5% to 25% on $185 billion worth of U.S. goods.
Beijing has called upon the U.S. to roll back its tariffs further, but Mnuchin said Tuesday they will remain in place another deal is made. “There’s no side agreements. The only way that the president will be reducing the tariffs is if there is a ‘phase two’ part of the agreement that is also fully enforceable,” he told Fox Business.
Trump has said he’ll travel to China this year to get “phase two” started. The next talks are expected to cover digital trade, China’s business subsidies, and its hacking of U.S. companies. He said Wednesday that the second part should complete the negotiations with Beijing. “We don’t expect a Phase 3,” Trump said. The administration had previously indicated that a third phase might be required.
