US, China Strike ‘Phase One’ Trade Deal, Tariff Hike Delayed, No Decision On December Escalation

US, China Strike ‘Phase One’ Trade Deal, Tariff Hike Delayed, No Decision On December Escalation

Rejoice!

The US and China have reached a “partial” trade deal. The details were initially sparse, and they remained so, primarily because not much was actually accomplished.

The world’s two largest economies came to a “substantial phase one” agreement this week, Donald Trump said, after meeting with Liu He at the White House. It will take weeks to get it in writing and will purportedly cover intellectual property, financial services and farm buys.

Read more: Markets Lost In Fog Of Trade War Amid Hopelessly Conflicting Reports

According to Trump, China’s farm purchases will grow to $40 to $50 billion. An enforcement mechanism is “being worked out”, he said.

For his part, Steve Mnuchin confirmed there is, in fact, an agreement around “FX transparency” with Beijing. Trump called that “an important part” of the trade discussion.

Huawei is not part of the truce, Bob Lighthizer said.

Beginning on Thursday, markets began to put a positive spin on the evolving narrative which had generally coalesced around the idea that although China would not bend on key structural sticking points (e.g., industrial policy, IP theft and forced technology transfer) the two sides were likely to cobble together an agreement that includes a currency “pact”, agricultural purchases and, crucially, some kind of tariff relief for China, whether that’s Trump delaying next week’s planned escalation and the scheduled December levies, or something more meaningful.

The limited deal will purportedly set the stage for a broader agreement that Trump and President Xi could ink later this year. “Phase one” could be signed by the two leaders in Chile next month.

The tariff rate on $250 billion in Chinese goods will not ratchet higher next week. It was scheduled to jump from 25% to 30%.

If the plan is, in fact, for Trump and Xi to sign a broader accord in the next few months, the White House could take the threat of duties on $160 billion in products scheduled for December 15 off the table. As of now, though, there is no final decision on that.

Expect this “deal” to be widely panned by trade hawks. There is no sense in which a promise of farm purchases for tariff relief constitutes a “win” for the administration.

Then again, everyone besides Trump and Peter Navarro knows nobody “wins” in a trade war, which means this is, was and always will be, a quixotic endeavor at best, and a tragicomedic farce at worst.


 

7 thoughts on “US, China Strike ‘Phase One’ Trade Deal, Tariff Hike Delayed, No Decision On December Escalation

  1. Doesn’t farm purchases for tariff relief get us back to around the starting point except, for you know, less actual farm purchases and higher tariffs than prior to the start of the “war.”

    1. yeah, but the market loves it… Could be worse…… Just took another bullish item off the shelf to distract from impeachment , Iran, Turkey and the Kurdish issue, as well as slowing growth….

    2. What were the stats for farm purchases before the trade war? There was absolutely zero pushback at the press conference when Trump was touting this as more farm purchases by China than ever before.

  2. Meanwhile, as the plot thickens:

    Not a good day for the insane one:

    The court declared that the president’s proclamation is invalid because it illegally sought to override Congress’s decision to not fund further border wall construction. The court invited the plaintiffs, El Paso County, Texas, and the Border Network for Human Right to propose terms for an injunction that would prevent the government from using funds to build border barriers that Congress specifically refused to authorize.

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