Donald Trump says ‘substantial phase-one deal’ reached in China trade talks, new tariffs delayed
- US president touts ‘substantial phase-one deal’ that will delay new tariffs after talks with China’s vice-premier Liu He
- High-level negotiations were aimed at ending a trade war that is threatening global economic growth
US President Donald Trump said his negotiators have reached a “substantial phase-one deal” that will delay the implementation of more US tariffs on Chinese imports after two days of high-level trade negotiations that aimed to move the two countries closer to a conclusion of a bruising bilateral trade war.
Speaking in the Oval Office, Trump touted a deal that includes intellectual property protections and purchases of US agricultural products worth as much as US$50 billion after US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer met with Chinese Vice Premier Liu He for two days in Washington.
However, no concessions for China’s telecom equipment giant Huawei Technologies, which faces restrictions on purchases from US companies, were made.
Liu, who presented Trump with a letter from Chinese President Xi Jinping, said through a translator that negotiators were making “a lot of progress in the right direction” and that righting the bilateral economic relationship would benefit both the two countries and the rest of the world.
The bonhomie extended beyond Xi’s letter to Trump. Reporters heard Liu wish “happy birthday” to Lighthizer, whose birthday is on Friday, when they met at USTR earlier in the day.
The “phase one” deal would take three to five weeks to write and work on a second phase deal would begin as soon as the first was signed, Trump said, adding that it might be ratified by himself and Xi during the Asia-Pacific Economic Cooperation (APEC) leaders’ meeting in Chile in mid-November.
All major US markets were up over one per cent Friday on the news, putting them in positive territory for the week, with the tech-heavy Nasdaq market up more than two per cent.
The technology sector has faced particular uncertainty as the trade war and national-security rhetoric have intensified. While many details of the agreement were only released after trading ended, Trump let it be known just before the close that a deal had been reached, confirming rumours and leaks that had spread throughout the day.
“Today’s deal eases tensions and gives both sides a chance to get back to the negotiating table to strike a more comprehensive deal,” said John Neuffer, president and chief executive of the Semiconductor Industry Association, which counts Intel, Qualcomm and Texas Instruments as members.
Trump, who had faced pressure from hardliners within his own administration not to accept anything less than a comprehensive deal, said that the agreement needed to be worked out “in sections” because it was “such a big deal”.
After escalating tariffs on each other’s imports throughout the trade war that started in July last year, Friday’s agreement paused USTR’s plan to impose an additional 5 per cent duty on US$250 billion worth of Chinese goods on October 15, which would have raised the levy to 30 per cent.
Lighthizer said no decision had been reached on whether fresh duties of 15 per cent on US$160 billion of largely consumer products, slated to take effect in December, would also be paused.
Meanwhile, Mnuchin said that completion of the phase one deal, including its provisions on currency, would be a step in the right direction in terms of the Treasury Department reconsidering its August designation of China as a currency manipulator.
World looks for trade war deal in the hope that it will end uncertainty
Analysts said the Trump administration, after playing hardball for months, appears to be recalibrating as protests from farmers and manufacturers grow louder. An impeachment inquiry that is threatening Trump, centring on the president’s alleged attempts to use foreign aid to influence Ukraine to investigate political rivals, has added pressure on his administration.
“President Trump, facing impeachment and an uncertain political future, did the prudent and smart thing by negotiating what can only be considered a truce in his trade war with China,” said Harry Kazianis, a senior director at the Washington-based think tank Centre for the National Interest.
“At the moment, Trump needs economic peace with Beijing and stable financial markets through the 2020 election cycle and during impeachment proceedings, and this deal is his best chance to secure such a goal,” he said, adding that: “with China’s economy struggling under the pressure of ever-increasing tariffs, this agreement came together based on both sides mutual short-term interests”.
Thomas Prusa, economics professor at Rutgers University and a research associate with the National Bureau of Economic Research, agreed.
World looks for trade war deal in the hope that it will end uncertainty
“Trade wars are not easy to win and he’s hearing a lot from companies about how much the tariffs are hurting,” Prusa said shortly ahead of Trump’s announcement. “My assumption is that the administration is calculating as we speak whether they can sell a small deal as a big victory or whether the hawks will continue to hold out for the brass ring
Prusa said companies have been willing to take a certain amount of pain in return for the promise of greater access to the China market, but the prospect of further increases in tariff levels on Tuesday and in December is trying their patience. This is particularly true for those in the middle of the supply chain having trouble passing on higher tariff costs, he added.
“Even a small deal, even if it doesn’t change things materially, could be helpful. Companies would love some sense of what’s going to happen over the next 12 months so they can plan, figure out should we move production out of China,” Prusa added.
“I think the Trump administration is realizing it’s going to be difficult to hold out for the next 12 months until the election without some sort of deal.”
The optimistic tone from the White House on Friday contrasted with expectations earlier this week.
How NBA, Xinjiang and Hong Kong are affecting US-China trade talks
Hopes for even a partial trade deal had dimmed in the few days leading up to the talks in Washington, amid a controversy over a Twitter post by a National Basketball Association general manager supporting anti-demonstrators in Hong Kong, the US government’s blacklisting of 28 Chinese entities for alleged human rights violations against minority groups and its decision to restrict visas for Chinese government officials suspected of the same.
“The question is: why would President Trump, having recently and repeatedly sworn not to settle for a partial agreement, suddenly reverse himself and accept the kinds of Chinese purchases and promises that satisfied his predecessors?” said Robert Daly, director of the Wilson Centre’s Kissinger Institute on China and the United States.
“It is likely that President Trump reversed himself because the tariffs and other aspects of the trade war are harming the American economy, which might damage his re-election prospects.”
Daly continued: “The ceasefire is the clearest admission the administration can offer that American consumers and communities have paid a high price for the trade war.”
Turning to Hong Kong, Trump downplayed the anti-government protests that have rattled the city for months, and added that the partial trade deal he struck with Liu will benefit the former British colony, which was handed back to China in 1997.
Trump says China trade talks went ‘very well’ ahead of White House meeting
“We discussed Hong Kong, and I think great progress has been made by China in Hong Kong,” Trump said of his meeting with Liu. “I’ve been watching, and I actually told the vice-premier it really has toned down a lot from the initial days of a number of months ago when I saw a lot of people, and I see far fewer now.”
Trump’s comments followed reports of more than 1,000 Hong Kong residents forming a 2km (1.2-mile) human chain in Tai Po to call for an end to alleged police brutality, as the city braced for its 19th consecutive weekend of anti-government protests.
“I think [the unrest is] going to take care of itself,” Trump added. “I think this [trade deal]is a very positive thing for Hong Kong.”