China, U.S. sign initial trade pact but doubts and
tariffs linger
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[January 16, 2020] By
Ryan Woo and Jeff Mason
BEIJING/
WASHINGTON (Reuters) - China will
boost purchases of U.S. goods and services by $200 billion over two
years in exchange for the rolling back of some tariffs under an initial
trade deal signed by the world's two largest economies, defusing an
18-month row that has hit global growth.
Key world stock market indexes climbed to record highs after the deal
was signed on Wednesday in Washington, but later stalled on concerns it
may not ease trade tensions for long, with numerous thorny issues still
unresolved.
While acknowledging the need for further negotiations with China to
solve a host of other problems, President Donald Trump hailed the
agreement as a win for the U.S. economy and his administration's trade
policies.
"Together, we are righting the wrongs of the past and delivering a
future of economic justice and security for American workers, farmers
and families," Trump said in rambling remarks at the White House
alongside U.S. and Chinese officials on Wednesday.
Chinese Vice Premier Liu He read a letter from President Xi Jinping in
which the Chinese leader praised the deal as a sign the two countries
could resolve their differences with dialogue.
"While markets seemed to take this deal as a risk-on signal, we should
all be aware that headlines about trade, particularly U.S. China trade,
are going to be a constant feature of 2020," said Hannah Anderson,
Global Markets Strategist, J.P. Morgan Asset Management in Hong Kong.
The centerpiece of the deal is a pledge by China to purchase at least an
additional $200 billion worth of U.S. farm products and other goods and
services over two years, above a baseline of $186 billion in purchases
in 2017, the White House said.
Commitments include $54 billion in additional energy purchases, $78
billion in additional manufacturing purchases, $32 billion more in farm
products, and $38 billion in services, according to deal documents
released by the White House and China's Finance Ministry.
Liu said Chinese companies would buy $40 billion in U.S. agricultural
products annually over the next two years "based on market conditions"
which may dictate timing of purchases in any given year.
Beijing had balked at committing to buy set amounts of U.S. farm goods
earlier, and has inked new soybean contracts with Brazil since the trade
war started.
Liu later said the deal would not affect "third parties' interests",
apparently in reference to deals made with other suppliers of farm
goods.
Chinese companies will import U.S. agricultural goods according to
consumers' need, and demand and supply in the market, Liu told
reporters, according to CCTV.
Although the deal could be a boost to U.S. farmers, automakers and heavy
equipment manufacturers, some analysts question China's ability to
replace imports from other trading partners with more shipments from the
United States.
The deal does not end retaliatory tariffs on American farm exports,
makes farmers "increasingly reliant" on Chinese state-controlled
purchases, and does not address "big structural changes," Michelle
Erickson-Jones, a wheat farmer and spokeswoman for Farmers for Free
Trade, said in a statement.
Oil prices rose, helped by expectations of more Chinese purchases of
U.S. oil and gas.
[to top of second column] |
U.S. President Donald Trump stands with Chinese Vice Premier Liu He
prior to signing "phase one" of the U.S.-China trade agreement in
the East Room of the White House in Washington, U.S., January 15,
2020. REUTERS/Kevin Lamarque?
Trump, who has embraced an "America First" policy aimed at rebalancing
global trade in favor of U.S. companies and workers, said China had
pledged action to confront the problem of pirated or counterfeited goods
and said the deal included strong protection of intellectual property
rights.
Washington's insistence on enforcement mechanisms "with real teeth"
could tear the deal apart if any tariffs are re-imposed for
non-compliance.
U.S. Speaker of the House of Representative Nancy Pelosi said Trump's
China strategy had "inflicted deep, long-term damage to American
agriculture and rattled our economy in exchange for more of the promises
that Beijing has been breaking for years," in a statement.
Earlier, top White House economic adviser Larry Kudlow told Fox News the
agreement would add 0.5 percentage point to U.S. gross domestic product
growth in both 2020 and 2021.
Aviation industry sources said Boeing Co <BA.N> was expected to win a
major order for wide-body jets from China, including its 787 or 777-9
models, or a mixture of both.
The deal touted new wins for U.S. companies looking to access China's
$40 trillion financial sector, but many of the changes were already in
the works with Beijing stepping up the pace of opening up in the past
year.
China's central bank said Chinese financial institutions are completely
capable of coping with foreign competition and it will strengthen
financial supervisions as the sector is freed up.
TARIFFS TO STAY
The Phase 1 deal canceled planned U.S. tariffs on Chinese-made
cellphones, toys and laptop computers and halved the tariff rate to 7.5%
on about $120 billion worth of other Chinese goods, including flat-panel
televisions, Bluetooth headphones and footwear.
But it will leave in place 25% tariffs on a $250-billion array of
Chinese industrial goods and components used by U.S. manufacturers, and
China's retaliatory tariffs on over $100 billion in U.S. goods.
Market turmoil and reduced investment tied to the trade war would likely
cut global growth in 2019 to its lowest rate since the 2008-2009
financial crisis, the International Monetary Fund said in October.
Trump, who has been touting the Phase 1 deal as a pillar of his 2020
re-election campaign, said he would agree to remove the remaining
tariffs once the two sides had negotiated a "Phase 2" agreement.
"We've already begun discussions on a Phase 2 deal," Vice President Mike
Pence said in a Fox Business Network interview.
(Reporting by Ryan Woo, Jeff Mason, Andrea Shalal and Dave Lawder;
Additional reporting by Echo Wang, Lisa Lambert, Susan Heavey Lisa
Lambert and Doina Chiacu in Washington, Tim Aeppel in New York, Mark
Weinraub in Chicago, Se Young Lee and Stella Qui in Beijing and Tim
Hepher in Paris; Writing by Michael Perry; Editing by Lincoln Feast)
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