By Lingling Wei, Bob Davis, William Mauldin and Josh Zumbrun
President Trump has agreed to a limited trade agreement with
Beijing that will roll back existing tariff rates on Chinese goods
and cancel new levies set to take effect Sunday as part of a deal
to boost Chinese purchases of U.S. farm goods and obtain other
concessions, according to people familiar with the matter.
Mr. Trump met top economic and trade advisers on the agreement
for an hour Thursday, and senior administration officials were
making calls to tout the outlines of an agreement, the people
said.
If confirmed, U.S. trade representative Robert Lighthizer and
Chinese Ambassador Cui Tiankai are expected to sign at least the
outlines of a deal on Friday, said another person familiar with the
matter.
Michael Pillsbury, an adviser to the president, said he spoke
with Mr. Trump, who said the deal calls for China to buy $50
billion worth of agricultural goods in 2020, along with energy and
other goods. In exchange the U.S. would reduce the tariff rate on
many Chinese imports, which now ranges from 15% to 25%.
The Wall Street Journal reported earlier Thursday that the U.S.
side has offered to slash existing tariff rates by half on roughly
$360 billion in Chinese-made goods, in addition to canceling the
tariffs on $156 billion in goods that Mr. Trump had threatened to
impose on Sunday. That offer was made to Beijing in the past five
days or so.
Should Beijing fail to make the purchases it has agreed to,
original tariff rates would be reimposed. Trade experts call that a
"snapback" provision, though the president didn't use that term,
Mr. Pillsbury said.
In what Mr. Pillsbury described as a "goodwill gesture," the
U.S. plans to announce some tariff rate cuts on Friday. "The
president is upbeat and enthusiastic about his breakthrough,"
according to Mr. Pillsbury, a China scholar at the Hudson Institute
who advises the Trump administration.
The president has stressed that a so-called phase one deal --
which also includes measures to improve intellectual property
protection, open the Chinese financial services market and prevent
currency manipulation -- is expected to lead to a phase two deal.
That agreement would tackle more difficult problems, including
forced-technology transfer, subsidies, and the behavior of Chinese
state-owned firms.
A spokesman for the Chinese embassy didn't immediately respond
to a request for comment.
The limited trade pact could help revive U.S. agricultural
exports to China. Such sales had collapsed over the past year and a
half, with China retaliating against U.S. tariffs by halting farm
purchases. U.S. farm exports fell from as much as $25 billion in
recent years to below $7 billion in the 12 months through May,
according to Commerce Department data.
Farm exports to China have begun to climb in recent months as
the two sides reached a truce, but remain nearly 60% lower than
their pre-trade war peak.
Mr. Trump declared two months ago the two countries had reached
a framework for a limited pact to halt the trade war and allow
negotiation on possible future phases. Yet efforts to finalize the
terms proved elusive until Thursday, just days before new tariffs
targeting iPhones, toys and other consumer goods were set to take
effect.
Trade groups hailed Thursday's progress as a welcome respite
from what amounts to additional taxes at the border. Importers,
retailers and other American firms had worried more duties --
essentially U.S. taxes charged at the border -- would have the
effect of raising prices or hurting sales.
"We welcome the news that a U.S.-China phase one deal is
imminent," said Myron Brilliant, executive vice president and head
of international affairs at the U.S. Chamber of Commerce. "It will
bring stability to the U.S.-China relationship, but make no mistake
about it: There is still more work ahead and more problems to be
solved."
The Dow Jones Industrial Average rose 220.75 points, or 0.8%, to
28132.05. The S&P 500 gained 26.94 points, or 0.9%, to 3168.57,
while the Nasdaq Composite advanced 63.27 points, or 0.7%, to
8717.32.
Others raised concerns that rolling back tariff rates could take
away U.S. bargaining clout for future negotiations with China on
later phases of the deal.
Sen. Marco Rubio (R., Fla.), an outspoken China critic, said via
Twitter that the "White House should consider the risk that a
near-term deal with China would give away the tariff leverage
needed for a broader agreement on the issues that matter the most
such as subsidies to domestic firms, forced tech transfers &
blocking U.S. firms access to key sectors."
Senate Democratic leader Chuck Schumer (D., N.Y.) led a letter
from Democrats saying that "failure to secure commitments from the
Chinese government to enact substantive, enforceable, and permanent
structural reform will jeopardize American jobs and long-term
economic prosperity."
In the past, emerging deals with China have collapsed, including
a nearly completed pact in May whose demise triggered a sharp
escalation in tariffs from Mr. Trump and a reduction in offers to
make economic overhauls in China. Trade experts cautioned that any
final deal should include a complete text backed by Washington and
Beijing.
"Without public text of the agreement, there is no true deal,"
said Derek Scissors, a trade expert at the American Enterprise
Institute who has advised the Trump administration. "The president
will get hammered on a deal no matter what -- the real test is if
he sticks to it when the heat rises."
The White House had no immediate comment on the emerging
deal.
"Getting VERY close to a BIG DEAL with China," President Trump
wrote in a tweet Thursday morning: "They want it and so do we!"
If the two countries confirm and sign the limited pact, it will
show the Trump administration is eager to follow through on
promises to notch new deals with trading partners on the eve of his
2020 election year and possible impeachment.
On Tuesday, House Democrats said they reached a deal with U.S.
and Mexican officials on a revised North American trade pact
expected to win congressional ratification in coming months.
The phase one deal with China, if completed, would cover only a
small portion of the U.S. complaints against China's trade
practices, leaving largely untouched such fundamental issues as
subsidies and Chinese pressure on American firms to share
technology. Many in the U.S. business community remain skeptical
that discussions on phase two or phase three deals will bear
fruit.
In recent months, the U.S. has been collecting about $5 billion
a month from the tariffs on China, which are paid by U.S.
importers. If all the tariff rates were cut in half, it would save
American companies about $2.5 billion a month, or $30 billion a
year, in tariff payments.
Gregory Daco, chief U.S. economist at Oxford Economics,
estimates that cutting the tariffs by half would boost U.S.
economic growth by about 0.2 percentage points next year, but
cautioned that uncertainty would likely linger.
"Importantly, we can't reverse the damage already done by the
two-year long trade war, nor omit the dense fog of uncertainty that
will continue to restrain business and consumer activity in 2020,"
Mr. Daco said.
Most economists estimate that the tariffs had taken a toll on
the U.S., contributing to U.S. economic growth slowing to about 2%
in recent quarters, from about 3% last year. The International
Monetary Fund, for example, has estimated the tariffs would lower
U.S. growth by 0.6 percent. The toll was even sharper on China,
with growth estimated to drop 2%.
--Alex Leary, Tim Puko and Andrew Restuccia contributed to this
article.
Write to Lingling Wei at lingling.wei@wsj.com, Bob Davis at
bob.davis@wsj.com, William Mauldin at william.mauldin@wsj.com and
Josh Zumbrun at Josh.Zumbrun@wsj.com
(END) Dow Jones Newswires
December 12, 2019 19:56 ET (00:56 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.