Beijing and the White House announced Friday they had reached an agreement that would prevent new U.S. tariffs on Chinese goods from going into effect Sunday and reduce some existing tariffs. In exchange, China will increase its purchases of U.S. farm goods.
“We have agreed to a very large Phase One Deal with China. They have agreed to many structural changes and massive purchases of Agricultural Product, Energy, and Manufactured Goods, plus much more,” President Trump tweeted.
In a follow-up tweet, Trump said, “The Penalty Tariffs set for December 15th will not be charged because of the fact that we made the deal.” The White House had previously been set to enact 15% tariffs on a further $156 billion worth of Chinese goods starting Sunday.
…..The Penalty Tariffs set for December 15th will not be charged because of the fact that we made the deal. We will begin negotiations on the Phase Two Deal immediately, rather than waiting until after the 2020 Election. This is an amazing deal for all. Thank you!
— Donald J. Trump (@realDonaldTrump) December 13, 2019
Negotiations for “phase two” of the trade deal with Beijing will begin “immediately,” Trump said. The president had previously said they might wait until after the 2020 election.
The U.S. Trade Representative’s Office said that existing tariffs on $120 billion worth of Chinese goods would be halved to 7.5%, but the administration would not alter the existing 25% tariffs on $250 billion worth of Chinese products.
The USTR said the deal also would require China to make “substantial additional purchases of U.S. goods and services in the coming years,” but did not put a figure on the amount. The federal agency said the agreement establishes a rigorous “dispute resolution system” to ensure the terms of the deal are enforced, but provided no details on the system.
“President Trump has focused on concluding a Phase One agreement that achieves meaningful, fully-enforceable structural changes and begins rebalancing the U.S.-China trade relationship,” said U.S. Trade Representative Robert Lighthizer.
Chinese Commerce Vice Minister Wang Shouwen told reporters Friday that Beijing had an agreement with the United States covering agriculture, intellectual property protection, forced technology transfer, opening markets, and currency issues. Shouwen said the deal would implement “phase one” of a deal the countries announced back in October.
White House economic adviser Larry Kudlow said that the deal allows the U.S. to impose new tariffs on China if it backslides on its commitments. “If it’s not resolvable, some economic valuation will be ascribed, and actions will be taken. No question, there could be tariff actions taken as an enforcement tool,” Kudlow told CNBC.
Earlier on Friday, Trump tweeted, “The Wall Street Journal story on the China Deal is completely wrong, especially their statement on Tariffs. Fake News. They should find a better leaker!” The president did not elaborate but was presumably referring to a piece that asserted Trump could halt the Dec. 15 tariffs and roll back others in exchange for China increasing its U.S. agriculture purchases.
Business trade groups applauded the announcement. “Today’s announcement represents real progress, and manufacturers look forward to working with President Trump and U.S. Trade Representative Robert Lighthizer to achieve additional concrete outcomes,” said National Association of Manufacturers President Jay Timmons.
The Business Roundtable called the announcement a “positive step” and urged both sides to “continue progress toward additional structural reforms in China and tariff relief.”
News of a deal leaked to various outlets Thursday, but the White House and China refused to confirm those reports, with officials saying that negotiations were still ongoing.
The White House and Beijing have been engaged in talks for two months to complete “phase one” of a trade agreement announced on Oct. 11. The deal has progressed slowly, with both sides arguing over how the terms would be written and whether the administration would remove some of the tariffs it has imposed. Beijing has made further talks conditional on rolling back tariffs, a move the White House has resisted.
“Cancelling tariffs is core to China’s concerns in the trade negotiations, and both sides have reached agreement on that,” China’s Vice Finance Minister Liao Min told reporters Friday.
