By William Mauldin, Lingling Wei and Alex Leary
The U.S. and China reached a first-stage deal to end their
long-running trade war, a milestone in President Trump's initiative
to rebalance the economic relationship with China.
The limited agreement, capping months of sometimes-testy
negotiations, calls for China to purchase more products from
American farmers and other exports, U.S. officials said. In return,
the U.S. put the brakes on new tariffs set to take effect Sunday
and agreed to reduce some existing levies. Both sides termed it a
"phase one" deal and said negotiations would continue on remaining
issues.
Mr. Trump called the deal "phenomenal" and told reporters in the
Oval Office that the U.S. would continue to use the remaining
tariffs as leverage in future negotiations with China.
"I say affectionately that the farmers are going to have to go
out and buy much larger tractors because it means a lot of
business, a tremendous amount of business," Mr. Trump said.
But doubts remained, with some critics claiming the deal
amounted to little more than China agreeing to step up U.S. farm
purchases and not make the kind of long-term economic changes that
U.S. officials have said are needed to level the playing field for
businesses.
"He has sold out for a temporary and unreliable promise from
China to purchase some soybeans," Senate Democratic leader Chuck
Schumer (D., N.Y.) said.
Others said that even with the limitations, the phase-one deal
marked a significant turning point in U.S.-China relations.
"This doesn't solve all of our problems," said Clete Willems, a
former Trump administration economic official and current partner
at law firm Akin, Gump, Strauss, Hauer & Feld LLP. "But it is
very important for the U.S. and China to be able to say 'yes' to
each other on some things."
As part of the deal, the U.S. canceled plans to impose fresh
tariffs on $156 billion in annual imports of Chinese-made goods --
including smartphones, toys and consumer electronics -- that were
set to go into effect Sunday. The U.S. will also slash the tariff
rate in half on roughly $120 billion of goods affected on Sept. 1,
from 15% to 7.5%.
U.S. tariffs of 25% would remain on roughly $250 billion in
Chinese goods, including machinery, electronics and furniture. In
exchange, officials in Washington said China agreed to increase
American agricultural purchases by $32 billion over previous levels
over the next two years.
That would increase total farm-product purchases to $40 billion
a year, with China working to raise it to $50 billion a year, U.S.
trade representative Robert Lighthizer told reporters at the White
House. The farm purchases would be part of total additional exports
of $200 billion over two years, said Mr. Lighthizer, who didn't
provide specifics.
Mr. Lighthizer also said China made specific commitments on
intellectual property, including counterfeiting, patent and
trademark issues and pharmaceutical rights, as well as on
preventing the forced transfer of technology from firms entering
the Chinese market. He and Chinese Vice Premier Liu He are expected
to sign the deal in early January, with the pact entering into
force 30 days later, Mr. Lighthizer said.
While he portrayed the first phase as a crucial step, Mr.
Lighthizer acknowledged that tougher issues lay ahead in future
negotiating rounds, including opening up closed Chinese markets, if
the U.S. is to achieve a fundamental shift in the trade
relationship with China.
Neither government submitted a full text or even a detailed
summary of the deal, hamstringing efforts to determine the winners
and losers in the world's two biggest economies or the quality of
the agreement.
U.S. stock markets ended the day slightly higher, with some
analysts saying they were awaiting more details on the
specifics.
"The devil remains in the details," Bankrate.com senior economic
analyst Mark Hamrick said. "We await further word on purported
aspects of the agreement including purchases of U.S. farm goods,
intellectual property protections, technology transfers and access
to China's financial sector."
Mr. Lighthizer declined to specify when the two countries would
begin active negotiations on phase two, where U.S. negotiators are
likely to seek further progress on knottier issues such as Chinese
pressure on American businesses to share technology and Beijing's
subsidies to domestic companies.
Chinese negotiators struck a more cautious tone. At a hastily
arranged press conference at the main propaganda department in
central Beijing, senior Chinese economy officials didn't disclose
much detail, except to confirm that both sides had reached an
agreement in principle.
Vice Commerce Minister Wang Shouwen, one of China's lead
negotiators, said the U.S. had agreed to remove the remaining
tariffs on Chinese products "in stages." Mr. Lighthizer said there
was no agreement on that, and suggested China believes further
reductions could be negotiated in subsequent phases of the
deal.
Trade experts briefed by officials had expected the U.S. to
eliminate the tariffs imposed on retail goods on Sept. 1 or roll
back more tranches of tariffs, rather than merely halving the
September tariff rates.
As recently as a week or so ago, U.S. negotiators presented
their Chinese counterparts a bigger proposal that would have
required Beijing to commit to massive purchases of farm and other
products, The Wall Street Journal reported on Thursday. In
exchange, Washington would have slashed by as much as half the
tariff rates on about $360 billion of Chinese imports, in addition
to canceling the levies that were planned for Sunday.
But the Chinese negotiators, led by Mr. Liu, President Xi
Jinping's point man on U.S. trade, balked at guaranteeing the
purchases for fear that such managed trade could violate the rules
of the World Trade Organization and cause friction between China
and its other trading partners.
"China has yet to confirm this pledge or provide any details on
how they will meet it," said Brian Kuehl co-executive director of
Farmers for Free Trade, which backs removing tariffs and opening
markets. "There are rightfully many doubts about the president's
claim that China will purchase $50 billion in ag products in a
single year -- more than twice the level of pre-trade war annual
purchases."
At Friday's briefing, Ning Jizhe, a top deputy of the National
Development and Reform Commission, hewed to the position Beijing
has maintained throughout the negotiations: "Expanding trade
cooperation must be based on market principles and WTO rules."
That emphasis raised questions about whether China committed to
any big purchases of U.S. products at all, according to industry
experts tracking the talks. In addition, they said, the fact that
the U.S. only agreed to modest tariff reliefs as part of the
phase-one deal also shows that the purchases Beijing agreed could
be less than originally sought by Mr. Trump.
Chinese officials, declining to specify how much China expects
to buy from the U.S. as part of the near-term deal, also said the
U.S. had agreed to increase its imports of Chinese agricultural
products.
The trade battle has been dragging on for nearly two years. The
Trump administration initially sought a sweeping deal from Beijing
with the goal of getting the Chinese leadership to address a range
of issues such as the vast bilateral trade imbalance, Chinese
pressure on U.S. firms to share technology and Beijing's subsidies
to domestic firms.
A near-agreement between the two sides collapsed in early May
after Beijing made substantial changes to the draft text that
China's leadership saw as too lopsided in Washington's favor.
The trade war then intensified with both governments hitting
each other with fresh tariffs. In recent months, Mr. Trump and Mr.
Xi both came under economic and political pressure to ease the
trade tensions. Betting on the U.S. president's need to prop up the
economy and markets in the run-up to his re-election bid next year,
Mr. Xi's team proposed what it had sought for a while: carrying out
the negotiations in stages.
The Trump administration accepted that approach when a new truce
was declared in the Oval Office in October.
Since then, discussions between the two sides have focused on
how to get China to beef up its purchases of American farm
products. Such a move would benefit Mr. Trump's key supporters in
rural states as the 2020 campaign season gets under way.
Thornier issues involving Chinese subsidies of industry and
forced technology transfer has largely been left for future
discussions. Many in the U.S. business community remain skeptical
that those talks could bear any fruit. Mr. Trump said Friday he had
planned to start negotiations on phase two of the deal after the
2020 U.S. presidential election, but China wanted to start the
talks sooner.
Asked when the two sides will start those discussions, Liao Min,
China's Vice Finance Minister and a trusted aide to Mr. Liu, the
chief negotiator, said: "The urgent task right now is to get the
phase-one agreement signed and implemented."
--Andrew Restuccia, Tim Puko and Chao Deng contributed to this
article.
Write to William Mauldin at william.mauldin@wsj.com, Lingling
Wei at lingling.wei@wsj.com and Alex Leary at
alex.leary@wsj.com
(END) Dow Jones Newswires
December 13, 2019 17:07 ET (22:07 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.