It has taken a little time, but it now appears that the United States and China have concluded a deal and declared a truce in their trade war. Officials in the administration of U.S. President Donald Trump — and Trump himself — last Friday said that the two sides reached agreement on “a phase one deal,” but Beijing was slow to do the same. That reticence appears to have ended with Chinese officials now acknowledging that the two countries made progress and are calling the outcome “a deal.” Their success is to be applauded, but only briefly. The agreement is only preliminary, it has not yet been committed to paper, and by all indications it does not address the big issues fundamental to the discord in their bilateral trade relationship.
Consistent with his belief that trade wars are effective tools of U.S. policy and easy to win, Trump has imposed steadily increasing sanctions on Chinese exports to the U.S. Today, the U.S. has levies on some $375 billion of Chinese imports, about 63 percent of the annual total of $550 billion. China has retaliated with tariffs on more than $110 billion worth of U.S. goods. Trump was prepared to double down despite the failure of sanctions to force Beijing’s capitulation: This week, Washington was set to raise tariffs from 25 percent to 30 percent on $250 billion of Chinese goods.
Under last week’s deal, the U.S. agreed to delay imposition of those tariffs while China will increase purchases of agricultural goods, increase access to its financial markets and improve protections on intellectual property. The purchase of additional $40 billion to $50 billion in farm products is a big deal. If carried out, it will be a near doubling of current sales to China, which have never exceeded $26 billion a year.
A cease-fire serves everyone’s interests. Trump gets a win for farmers, a constituency that has been hard hit by the trade dispute and just in time for the 2020 election campaign. China’s economy is slowing and this provides a much-needed boost: Its exports to the U.S., the country’s biggest foreign market, fell 21.9 percent in September, following a 16 percent drop in August. There are concerns that China’s economic growth will drop below 6 percent, the official target. Imports of pork will ease inflationary pressures on a popular food item.
Caution is in order, however. The two countries have previously declared cease-fires in their trade war, and each time the truce collapsed under competing interpretations of what had been agreed. The possibility for history to repeat itself is high. There is no text for the deal; the two governments have given themselves five weeks to hammer out a document, one that Trump and his counterpart, Chinese President Xi Jinping, can sign when they are scheduled to meet at the Asia-Pacific Economic Cooperation leaders meeting in Chile next month.
U.S. officials have pointedly noted that the deal does not roll back existing sanctions on Chinese exports, nor does it affect the imposition of 15 percent tariffs on a different set of goods that is slated to go into effect in December; Treasury Secretary Steven Mnuchin, one of the lead U.S. negotiators, warned that failure to conclude this preliminary deal would ensure that those taxes go into effect.
Meanwhile, official Chinese statements have pointedly steered away from the notion that the government is directing agriculture sales, noting that “market-oriented purchases” have continued throughout the year.
Sharp-eyed observers say that other Chinese concessions are minor, and were made in previous rounds of talks. Notably, there is no enforcement mechanism for the deal, a demand that U.S. negotiators said was nonnegotiable — and insist will be in the final agreement — and the U.S. continues to sanction Huawei, the Chinese telecommunications giant.
Finally, and most significantly, the agreement says nothing about the structural issues that lie at the heart of U.S. — and other countries’ — complaints about Chinese trade practices. Ostensibly, they will be taken up in subsequent phases of negotiations but it is hard to see how China can accept demands that go to the core of its economic and industrial policies.
Japan is pleased to see the two sides reach an agreement. The trade war is one of the biggest sources of global uncertainty. Japanese businesses have been hurt by the Chinese slowdown; any uptick in economic activity can ripple through to their advantage. They also have an interest in halting China’s predatory economic behavior, getting it to better protect international property rights and ensuring that it respects supply chain integrity.
We applaud these first steps toward a broader trade agreement between the U.S. and China, and urge countries to address those issues with seriousness and speed.