Beijing/Washington | Reuters — The United States and China cooled their trade war on Friday, announcing a “phase one” agreement that reduces some U.S. tariffs in exchange for increased Chinese purchases of U.S. farm goods.
Chinese officials offered no specific details on the amount of U.S. agricultural goods Beijing had agreed to buy, a key sticking point in recent deal negotiations to end the 17-month trade war between the world’s two largest economies.
The agreement was announced as the U.S. House judiciary committee voted in Washington to charge U.S. President Donald Trump with abuse of power and obstruction during an impeachment inquiry.
Some U.S. business groups hailed the deal as an end to uncertainty that’s slowed global growth; critics questioned whether the trade war had been worth the job losses and drop in sales.
U.S. markets have gyrated on rumours and leaks about the trade deal in recent months, but were muted on Friday on news it had been agreed.
In a press conference Friday night in Beijing, Chinese officials said the two countries have achieved major progress in their phase one trade negotiations, and agreed on the text of a phase one deal.
Trump tweeted Friday morning “We have agreed to a very large Phase One Deal with China.” Officials in China have “agreed to many structural changes and massive purchases of Agricultural Product, Energy, and Manufactured Goods, plus much more,” he said.
During a later news conference in the White House, Trump said he thought China would hit $50 billion in agricultural purchases.
The U.S. has agreed to suspend tariffs on $160 billion in Chinese goods due to go into effect on Dec. 15, Trump said on Twitter, and cut some existing tariffs to 7.5 per cent (all figures US$).
The Dec. 15 tariffs, which would have hit nearly $160 billion worth of Chinese-made consumer goods, including cell phones, laptop computers, toys and clothing, were scheduled to go into effect at 12:01 a.m. on Sunday. The U.S. Trade Representative’s office would need to file a Federal Register notice to rescind them, U.S. trade lawyers say.
A statement issued by USTR Friday did not mention the Dec. 15 tariffs, but said that the United States would leave in place 25 per cent tariffs on $250 billion worth of Chinese goods. The Trump administration will cut the tariff rate in half, to 7.5 per cent, on another $120 billion list of Chinese imports that was levied on Sept. 1, USTR said.
The products getting the lower tariff rate include flat-panel television sets, smart speakers, Bluetooth headphones and many types of footwear.
China has also agreed to suspend retaliatory tariffs, targeting goods ranging from corn and wheat to U.S. made vehicles and auto parts, that were due to take effect Dec. 15.
No farm buy details
China will import more U.S. wheat, corn, and rice after the deal, China’s vice agricultural minister said Friday, but did not elaborate.
China has not been a major buyer of U.S. corn, wheat or rice in the past – though in recent years it has been the No. 3 or 4 buyer of one particular variety of wheat, U.S. spring wheat used for blending. China was a top 5 buyer of U.S. corn from 2011 to 2014 but has not been a major buyer since.
The United States has been pushing for Beijing to commit to buy $50 billion in agricultural products in 2020, after Trump said during an Oct. 11 press conference that the two countries had agreed to a “Phase one” trade deal that included a “purchase of from $40 (billion) to $50 billion worth of agricultural products.”
Beijing has since balked at committing to buy a specific amount of agricultural goods during a certain time frame, however. Chinese officials said they would like the discretion to buy based on market conditions.
China bought $24 billion in U.S. farm products in 2017, according to U.S. Department of Agriculture figures.
After the October news conference, analysts questioned whether the $50 billion figure was realistic.
Soybeans made up half of China’s agricultural purchases in 2017. Demand has since cratered because the pig herds that eat it have been decimated by African swine fever.
Asked specifically about the $50 billion figure, officials in Beijing said Friday that details on value will be disclosed later.
Intellectual property protections
The agreement covers intellectual property, technology transfer, agriculture, financial services, currency, and foreign exchange, the U.S. Trade Representative said in a statement Friday morning.
The deal will provide more protection for foreign companies in China, and Chinese companies in the United States, Chinese officials said.
Neither offered details.
The Business Roundtable, a group of chief executives of the largest U.S. companies, said “This de-escalation in trade tensions is a positive step toward resolving important trade and investment issues between our two nations.”
Chris Murphy, the Connecticut senator, called it a “total capitulation,” saying China had made “zero hard commitments to structural reform.”
— Reporting for Reuters by Stella Qiu, Martin Pollard, David Lawder, Karl Plume, Mark Weinraub and Julie Ingwersen; writing by Heather Timmons.