Trump hails ‘momentous’ US-China trade deal at White House signing

Wed, 2020-01-15 19:56

WASHINGTON: President Donald Trump on Wednesday described an
initial trade agreement with China as “momentous”
and “righting the wrongs of the past and delivering a future of
economic justice and security for American workers, farmers and
families.”

“Today, we take a momentous step, one that’s never taken before
with China,” that will ensure “fair and reciprocal trade,” Trump
said at the White House signing ceremony.

The president signed a trade agreement with China that is
expected to boost exports from US farmers and manufacturers and
ease trade tensions between the two countries going into
November’s presidential election.

For Trump, the White House ceremony gives him the opportunity to
cite progress on a top economic priority on the same day that the
House votes to send articles of impeachment to the Senate for a
trial.

Trump and China’s chief trade negotiator, Liu He, signed the
modest agreement. It is intended to ease some US economic
sanctions on China while Beijing would step up purchases of
American farm products and other goods. The deal would lower
tensions in a fight that has slowed global growth, hurt American
manufacturers and weighed on the Chinese economy.

But the “Phase 1” agreement would do little to force China
to make the major economic changes such as reducing unfair
subsidies for its own companies that the Trump administration
sought when it started the trade war by imposing tariffs on Chinese
imports in July 2018.

Larry Kudlow, Trump’s chief economic adviser, said the
agreement vindicated the president’s strategy of using tariffs in
trade negotiations, though not in every instance. “I think with
China he was exactly right,” Kudlow said. ”I think the tough
tariffs hurt their economy and made them much more amenable to a
good deal.”

Most analysts say any meaningful resolution of the main U.S.
allegation — that Beijing uses predatory tactics in its drive to
supplant America’s technological supremacy — could require years
of contentious talks. Skeptics say a satisfactory resolution may be
next to impossible given China’s ambitions to become the global
leader in such advanced technologies as driverless cars and
artificial intelligence.

This first phase “hardly addresses in any substantive way the
fundamental sources of trade and economic tensions between the two
sides, which will continue to fester,” said Eswar Prasad, a
Cornell University economist and and former head of the
International Monetary Fund’s China division.

The thornier issues are expected to be taken up in future rounds
of negotiations. But it’s unclear when those talks might begin,
and few observers expect much progress before the U.S. presidential
election in November.

“Phase 2 — I wouldn’t wait by the phone,’’ said John
Veroneau, who was a U.S. trade official when George W. Bush was
president and is now co-chair of the international trade practice
at the law firm Covington & Burling. “That is probably a 2021
issue.’’

The US has dropped plans to impose tariffs on an additional
$160 billion in Chinese imports, and it cut in half, to 7.5%,
existing tariffs on $110 billion of good from China.

Beijing agreed to significantly increase its purchases of U.S.
products. According to the Trump administration, China is to buy
$40 billion a year in U.S. farm products — an ambitious goal for
a country that has never imported more than $26 billion a year in
U.S. agricultural products.

The deal may be most notable for what it doesn’t do. It leaves
in place tariffs on about $360 billion in Chinese imports — a
level of protectionism that would have been unthinkable before
Trump took office.

Beijing’s retaliatory tariffs affect more than half of
American exports to China. The average U.S. tariff on Chinese
imports has risen from 3% in January 2018 to 21% now.

The administration argues that the deal is a solid start that
includes Chinese commitments to do more to protect intellectual
property, curb the practice of forcing foreign companies to hand
over sensitive technology and refrain from manipulating their
currency lower to benefit Chinese exporters. In advance of
Wednesday’s signing, the Treasury Department on Monday dropped its
designation of China as a currency manipulator.

By maintaining significant tariffs on Chinese imports, the
administration retains leverage to force Beijing to abide by its
commitments — something the United States says Beijing has failed
to do for decades.

The administration contends that however narrow the first phase
may be, it represents a significant breakthrough.

Derek Scissors, China specialist at the American Enterprise
Institute, said the trade war has already delivered a benefit for
Trump, even if it hasn’t forced Beijing to make major changes to
its economic policy: Trump’s tariffs have reduced Chinese exports
to the United States and narrowed America’s trade deficit with
China.

The president has long lambasted the U.S. trade gap with Beijing
as a sign of economic weakness, though many economists disagree. A
wide trade deficit can actually reflect economic strength because
it means that a nation’s consumers feel prosperous and confident
enough to spend freely — on imported goods as well as on
home-grown goods.

So far this year, the US deficit with China in the trade of
goods has declined by 16%, or $62 billion, to $321 billion compared
with a year earlier. The deficit will narrow further if Beijing
lives up to its pledges to buy dramatically more American
imports.

Trump’s tariff increase have proved to be a headwind for
China’s economy, which was already slowing, though the damage has
been less than some expected. Chinese global exports eked out a
0.5% increase in 2019 despite a plunge in sales to the United
States, according to Chinese customs data.

Chinese exporters responded to Trump’s tariff hikes by
shipping goods to the United States through other countries and by
stepping up sales to Asia, Europe and Africa. The government
reported double-digit gains in 2019 exports to France, Canada,
Australia, Brazil and Southeast Asia.

Economists said the tariff war slowed Chinese growth, which hit
a multi-decade low of 6% in the quarter ending in September, by as
little as 0.6 percentage point. Weak domestic demand and the
cooling of a construction boom inflicted more damage.

Main category: 

US-China ‘Phase One’ trade deal to be signed Jan. 15US-China
trade deal gets tepid reception
Source: FS – All-News-Economy
Trump hails ‘momentous’ US-China trade deal at White House signing