It’s finally happening …
After two years of combative public feuding, the United States and China are reportedly set to formally agree to phase one of a trade deal on Wednesday.
Though the trade deal will not permanently halt the feud or put an end to President Donald Trump’s tariffs against the Asian nation, it will reportedly afford the United States a slew of benefits that previous administrations were unable to attain.
As Cornell University professor and Brookings Institution senior fellow Eswar Prasad has put it, “Trump’s tough line on China has shaken loose more apparent concessions from the Chinese than previous administrations managed. The previous, longstanding policy of constructive engagement, using persuasion couched in the language of mutual benefits, bore little fruit.”
These concessions include:
- China purchasing up to $50 billion in crops, $40 billion in services, $50 billion in energy and $75 billion in manufacturing over the course of the next two years, according to Fox Business Network.
- China beefing up its protection of intellectual property rights, which will hopefully help prevent U.S. technologies and trade secrets from being stolen outright.
- China opening up more of its economy for foreign investment, thus allowing the United States the opportunity to increase its exports to the Asian nation.
Speaking with Fox Business Network host Lou Dobbs early Tuesday evening, Treasury Secretary Steven Mnuchin offered more details on the deal.
“The president had been clear from his first meeting with President Xi [Jinping],” he said. “There were two issues here. One was he wanted to reduce the trade deficit. And two, he wanted structural changes, particularly around forced technology and other issues.”
“So this is an additional $200 billion, which is very significant. And specifically and for our farmers. There will be 40 to 50 billion dollars annually in purchases. So this is a great win for American business and American farmers.”
He warned though that the Trump administration plans to enforce the deal to a T.
“This is an enforceable agreement as the president dictated it would be,” he said.
Other top officials have said the same.
“We’re tough, hard people, and we expect them to live up to the letter of the law,” U.S. Trade Representative Robert Lighthizer told Dobbs on Monday. “We’ll bring cases. We’ll bring actions against them if they don’t, but for right now, this is a really, really big agreement — a huge step forward.”
According to Mnuchin, Lighthizer will in fact “be leading the enforcement office. He will be dedicating people to this.”
Listen to the relevant portion of the treasury secretary’s interview with Dobbs below:
(Source: Fox Business Network)
When asked by Dobbs about “phase two” of the deal, the secretary said that he plans to begin working on it at the World Economic Forum in Davos next week.
“We’re meeting with our counterparts on this. We’ll be in Davos next week with the president, so we’ll be seeing a lot of my counterparts there and having bilateral meetings on this. …,” he said.
“There will be other issues in phase two. There’s been misreporting about side agreements and things like that. There’s no side agreements. The only way the president will be reducing the tariffs is if there is a phase two part of the agreement that’s also fully enforceable.”
While the deal appears to be a victory for the United States, some in the media have suggested America is slated to lose out in the long-run because of it.
Writing for The New York Times, for instance, Prasad warned that the deal will allow China to grow its economy.
“Many elements of the deal will make the Chinese economy stronger,” he wrote. “China wants to be a more dynamic, innovation-led economy, so better protection of intellectual property rights will help.”
“Opening up parts of its economy, such as banking and insurance, will spur competition and innovation in, for example, the Chinese financial sector. Many of the ostensible concessions are in areas where Chinese reformers have long sought to create change for their country’s own good.”
But others say that, no, the true long-term benefit will go the U.S.:
Rep. @RogerMarshallMD (R-KS) on Pres. Trump’s trade deals:
“We’re seeing more jobs move back to Kansas, move back to this country. The USMCA alone is going to move thousands of jobs back to Kansas. …There is some short-term pain, but there’s long-term gain opportunity.” pic.twitter.com/jpo13ZxCgc
— Washington Journal (@cspanwj) January 15, 2020
As for Wall Street, it appears to be poised to respond to the deal in a neutral, wary fashion.
“The market is skeptical on the benefits of the deal, but relieved at the reduced chance of an escalating trade war,” Charlie Bobrinskoy, the head of Ariel Investments, reportedly said.
“Most of the details have been leaked, so there are some decent-size numbers in terms of agricultural purchases—and that’s one sector that should benefit from this—but overall we’ll see more of a return to pre-trade-war levels of Chinese purchases rather than significant new markets.”
“The fact the U.S.-China trade war isn’t escalating further is certainly beneficial, but stocks are largely already reflecting ‘Phase One’ in full,” Adam Crisafulli, the founder of Vital Knowledge, reportedly wrote Tuesday.
He predicted that despite the “rhetoric and theater” of Wednesday’s signing ceremony, investors “shouldn’t conflate that with substantive change — Washington is keeping the majority of its tariffs in place, and the U.S.-China relationship is set to stay fraught for the foreseeable future.”
Suffice it to say, while the deal is a good thing, much more remains to be accomplished.
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