President Donald Trump and China’s Vice-Premier Liu He signed the Phase One deal of a new U.S.-China trade agreement on January 15th, 2020, in order to deescalate the tensions of the 18-month long trade war between the two nations.
Phase One reiterates the initial commitments both countries made to each other in previous trade talks, with the goal of equalising the trade values between both parties. China has committed to purchasing at least US$200 billion worth of U.S. goods and services in the coming two years, while the U.S has agreed to reduce certain tariffs on Chinese goods.
China’s commitment to purchase US$200 billion worth of U.S. goods and services has been specified into four categories; US$78 billion in manufacturing, US$52 billion in energy, US$38 billion in services, and US$32 billion the agricultural sector.
In return, the U.S. has agreed to cut the tariffs on approximately US$120 billion worth of Chinese imports from 15% down to 7.5%. This phase one agreement does not apply to the majority of Chinses imports which are estimated to be valued at around US$360 billion.
China has committed a willingness to establishing and implementing a comprehensive legal system of intellectual property protection and enforcement as it transforms from a major intellectual property consumer to a major intellectual property producer. As part of the new Foreign Trade law issued on the 1st of January 2020, China has expressly prohibited the forced transfer of technology as a condition of market entry. Although China has not made any specific commitment on the reduction of tariffs imposed on U.S goods, both parties have stated that moving forward the next rounds of negotiations currently appear to be promising. This warming of the relations is underscored by the removal of China from the U.S list of currency manipulators on the 14th of January.
Strong commitments from both parties will be required to ensure the success of this agreement. This trade deal is still at its initial phase and will go through extensive negotiations as both parties try to ensure a prosperous future.