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U.S. and China Agree to Temporary Cease-Fire in Trade War

Posted October 15, 2019

Following two days of talks in the latest round of negotiations in Washington, the United States and China declared a tentative cease-fire last Friday in their damaging trade war in order to resume talks aimed at resolving outstanding issues in the dispute.

Under the truce, the Trump administration has agreed to temporarily suspend a tariff hike on $250 billion in Chinese imports that was set to take effect today, and China vowed to purchase up to $50 billion worth of American farm products, potentially more than doubling the $24 billion in agricultural and related products China purchased from the U.S. in 2017.

In a tweet this weekend, Trump hailed the agreement as “by far, the greatest and biggest deal ever made for our Great Patriot Farmers in the history of our Country. In fact, there is a question as to whether or not this much product can be produced? Our farmers will figure it out...” Speaking earlier to the press, the president joked that farmers “are going to have to work a lot of overtime” and suggested they “immediately buy more land and get bigger tractors.”

Non-Tariff Barriers

According to U.S. Trade Representative Robert Lighthizer, just as important as the purchases of farm goods are the numerous “corrections” which have been made regarding a variety of sanitary, phytosanitary and biotechnology issues. With the remediation of these non-tariff barriers, “it will be much easier now for American farmers to be able to ship to China,” Lighthizer said.

Outstanding Issues

As for the more nettlesome issues that ostensibly drove Trump to launch his trade war — China’s “predatory” trade practices, alleged currency manipulation, forced transfer of proprietary technology and lax enforcement of intellectual property rights, among other things — White House officials claimed the two sides made “substantial progress,” but acknowledged that more work remains to be done on what it calls “phase one” of the ongoing talks with China.

“We have a fundamental agreement. It is subject to documentation, and there’s a lot of work to be done on that front,” Treasury Secretary Steven Mnuchin said. In this regard, Mnuchin indicated that he and USTR Lighthizer intend to meet with China’s lead negotiator, Vice Premier Liu He, ahead of a November Asia-Pacific summit in Chile.

It should be noted that despite the partial deal agreed to last week, the U.S. is still scheduled to target another $160 billion in Chinese goods starting on December 15, a move that would extend Trump’s punitive tariffs to virtually everything China ships to the United States.

Critical Reception

Critics of the agreement were quick to observe that the partial deal is far smaller in scope than what the president himself once envisioned and that its contours appear much the same to ones negotiated by both Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross over the past two years which the president had previously rejected.

Citing the scant details provided, the fact nothing has yet been committed to paper, and the apparent lack of progress resolving key trade and economic frictions, some experts described last week’s announcement “a nothing burger.” Calling it an “invisible deal,” Scott Kennedy, a China economic analyst at the Center for Strategic and International Studies told the Associated Press that “the only thing that happened Friday was that the U.S. delayed the tariff increase.”

Chinese Outlook 

Despite the skepticism of exports who doubt Beijing will make the fundamental changes to industrial policies or will fulfill the deal’s ambitious purchasing commitments, Chinese state media this week began touting progress on trade with America, highlighting bulk purchases of U.S. farm products it had already made this year and affirming that it was now “on the same page” as Washington in the ongoing trade talks.

According to Chinese foreign ministry spokesman Geng Shuang, the two countries are “have no difference in the stance on reaching a trade deal,” which he predicted “is going to carry very important meaning to China, the U.S. and the world, it will be beneficial for world trade and world peace.”

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Should you have any questions or concerns about how this latest development in the trade war might impact your company's imports from or exports to China, don’t hesitate to contact us – our trade experts are here to help.


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